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The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League

Posted: 27 Jan 2004  

Dennis W. Carlton

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Alan S. Frankel

LECG/Navigant Consulting

Elisabeth M. Landes

LECG/Navigant Consulting; National Bureau of Economic Research (NBER)

Abstract

This paper provides one of the few successful demonstrations of the efficiency of certain types of restrictions in the context of a joint venture. The joint venture we examine is the National Hockey League (NHL) in the 1980s, which was then composed of 21 separately owned teams. (It now has 30 teams.) The restriction we analyze is the NHL rule on franchise relocation. Before one can fully understand the effect of the restriction, one must understand the theory of how sports leagues operate and whether sports leagues have any market power that can be enhanced by such a restriction. After providing such a theory, we empirically test the effect of the NHL restriction on franchise relocation. Aside from data availability, the advantage of our time period is that television was then an unimportant source of revenue for the NHL. Thus we are able to isolate a particular externality arising from how the NHL finances teams.

Suggested Citation

Carlton , Dennis W. and Frankel, Alan S. and Landes, Elisabeth M., The Control of Externalities in Sports Leagues: An Analysis of Restrictions in the National Hockey League. Journal of Political Economy, Vol. 112, No. 1, pp. S268-S288, February 2004. Available at SSRN: https://ssrn.com/abstract=489698

Dennis W. Carlton (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
312-322-0215 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alan S. Frankel

LECG/Navigant Consulting ( email )

1603 Orrington
Suite 1500
Evanston, IL 60201
United States

Elisabeth M. Landes

LECG/Navigant Consulting

1603 Orrington
Suite 1500
Evanston, IL 60201
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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