Free Ride, Take It Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing

53 Pages Posted: 12 Oct 2010

See all articles by Daniel A. Rascher

Daniel A. Rascher

University of San Francisco - Sport Management Program; SportsEconomics; OSKR, LLC

Matthew T. Brown

University of South Carolina

Mark Nagel

University of South Carolina

Chad D. McEvoy

Syracuse University - David B. Falk College of Sport and Human Dynamics; Illinois State University

Date Written: October 12, 2010

Abstract

A fundamental belief in professional sport leagues is that competitive balance is needed to maximize demand and revenues; therefore, leagues have created policies attempting to attain proper competitive balance. Further, research posits that objectives of professional sport teams’ owners include some combination of winning and profit maximization. Although the pursuit of wins is a zero sum game, revenue generation and potential profit making is not. This article focuses upon the National Football League’s potential unintended consequences of creating the incentive for some teams to free ride on the rest of the league’s talent and brand. It examines whether an owner’s objectives to generate increased revenues and profits are potentially enhanced by operating as a continual low-cost provider while making money from the shared revenues and brand value of the league. The present evidence indicates that, overall, being a low-cost provider is more profitable than increasing player salaries in an attempt to win additional games.

Keywords: Free Riding, panel data, regression, football, revenue sharing, owner objectives

JEL Classification: L83, D12

Suggested Citation

Rascher, Daniel A. and Brown, Matthew T. and Nagel, Mark and McEvoy, Chad D., Free Ride, Take It Easy: An Empirical Analysis of Adverse Incentives Caused by Revenue Sharing (October 12, 2010). Available at SSRN: https://ssrn.com/abstract=1690883 or http://dx.doi.org/10.2139/ssrn.1690883

Daniel A. Rascher (Contact Author)

University of San Francisco - Sport Management Program ( email )

San Francisco, CA 94117
United States

SportsEconomics ( email )

2200 Powell St.
Emeryville, CA 94608
United States

OSKR, LLC ( email )

6425 Christie Avenue
Suite 230
Emeryville, CA 94608
United States

Matthew T. Brown

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Mark Nagel

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

Chad D. McEvoy

Syracuse University - David B. Falk College of Sport and Human Dynamics ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Illinois State University ( email )

Normal, IL 61790
United States

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