THE EFFECT OF GATE REVENUE SHARING ON SOCIAL WELFARE

THE EFFECT OF GATE REVENUE SHARING ON SOCIAL WELFARE This paper provides a theoretical model of a team sports league based on contest theory and studies the welfare effect of gate revenue sharing. It derives two counterintuitive results. First, it challenges the “invariance proposition” by showing that revenue sharing reduces competitive balance and thus produces a more unbalanced league. Second, the paper concludes that a lower degree of competitive balance compared with the noncooperative league equilibrium yields a higher level of social welfare and club profits. Combining both results, it concludes that gate revenue sharing increases social welfare and club profits in our model. (JEL L83) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Contemporary Economic Policy Wiley

THE EFFECT OF GATE REVENUE SHARING ON SOCIAL WELFARE

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Publisher
Wiley
Copyright
© 2008 Western Economic Association International
ISSN
1074-3529
eISSN
1465-7287
D.O.I.
10.1111/j.1465-7287.2007.00090.x
Publisher site
See Article on Publisher Site

Abstract

This paper provides a theoretical model of a team sports league based on contest theory and studies the welfare effect of gate revenue sharing. It derives two counterintuitive results. First, it challenges the “invariance proposition” by showing that revenue sharing reduces competitive balance and thus produces a more unbalanced league. Second, the paper concludes that a lower degree of competitive balance compared with the noncooperative league equilibrium yields a higher level of social welfare and club profits. Combining both results, it concludes that gate revenue sharing increases social welfare and club profits in our model. (JEL L83)

Journal

Contemporary Economic PolicyWiley

Published: Jul 1, 2008

References

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