Rev Ind Organ (2009) 34:5–44
Theory of the Perfect Game: Competitive
Balance in Monopoly Sports Leagues
Published online: 18 February 2009
© Springer Science+Business Media, LLC. 2009
Abstract Based on the limiting assumption that sports owners are proﬁt maximizers
the invariance proposition holds that revenue sharing has no impact on competitive
balance in sports leagues. If owners are win-maximizing sportsmen instead, then rev-
enue sharing can lead to increased competitive balance and higher payrolls. Evidence
of the sportsman effect is provided by erosion of monopsonistic exploitation in the
four major American sports leagues where players now share about 60% of revenues.
Monopsony power erosion forces sports-league cartels to exploit statutory monopoly
power in monster deals for media rights fees and public venue subsidies. New evi-
dence on competitive balance suggests that revenue sharing leads to increased balance
with or without team salary caps. Optimum competitive balance is an empirical ques-
tion, and the answer lies between random competition of the NFL and deterministic
dynasties of the NBA.
Keywords Professional sports leagues · Competitive balance
JEL Classiﬁcation L83
In theory there is no difference between theory and practice. In practice there is.
In theory the perfect game is a symbiotic contest between evenly matched opponents.
The practical economic problem is that games in professional sports leagues are played
J. Vrooman (
Department of Economics, Vanderbilt University, Nashville, TN 37235-1819, USA