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Revenue Sharing with Heterogeneous Investments inSports Leagues: Share Media, Not Stadiums

Revenue Sharing with Heterogeneous Investments inSports Leagues: Share Media, Not Stadiums This study examines revenue sharing in sports leagues where franchises engage in multiple types of investments. Previous literature typically treats revenues and investments as homogeneous, but we add to the literature by differentiating between investment types and revenue sources. This is important because investment in talent leads to winning, which is a zero-sum game for the league and therefore owners have an incentive to limit talent investment. However, other investments, such as stadiums, are not a zero-sum game, and therefore the implications of revenue sharing are different for the league. We provide sufficient conditions under which it is more efficient to share media revenue compared to stadium revenue. We conclude by providing applications of this model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Revenue Sharing with Heterogeneous Investments inSports Leagues: Share Media, Not Stadiums

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References (33)

Publisher
Springer Journals
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
DOI
10.1007/s11151-014-9423-2
Publisher site
See Article on Publisher Site

Abstract

This study examines revenue sharing in sports leagues where franchises engage in multiple types of investments. Previous literature typically treats revenues and investments as homogeneous, but we add to the literature by differentiating between investment types and revenue sources. This is important because investment in talent leads to winning, which is a zero-sum game for the league and therefore owners have an incentive to limit talent investment. However, other investments, such as stadiums, are not a zero-sum game, and therefore the implications of revenue sharing are different for the league. We provide sufficient conditions under which it is more efficient to share media revenue compared to stadium revenue. We conclude by providing applications of this model.

Journal

Review of Industrial OrganizationSpringer Journals

Published: May 22, 2014

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