Revenue Divergence and Competitive Balance in a Divisional Sports League

18 Pages Posted: 27 Jul 2004

See all articles by Stephen Dobson

Stephen Dobson

University of Otago - School of Business - Department of Economics

John A. Goddard

University of Wales, Swansea

Abstract

The North American model of resource allocation in professional sports leagues is adapted for English (association) football. Comparisons are drawn between the equilibrium allocations of playing talent under objective functions of profit maximisation and win percent maximisation subject to a financial constraint. Empirical revenue functions are reported for 1926-1999. These indicate a shift in the composition of demand favouring big-city teams and an increase in the sensitivity of revenue to performance. An analysis of match results in the FA Cup suggests an increase in competitive imbalance between teams at different levels of the league's divisional hierarchy, as the theory suggests.

Suggested Citation

Dobson, Stephen Mark and Goddard, John A., Revenue Divergence and Competitive Balance in a Divisional Sports League. Scottish Journal of Political Economy, Vol. 51, No. 3, pp. 359-376, August 2004. Available at SSRN: https://ssrn.com/abstract=568252

Stephen Mark Dobson (Contact Author)

University of Otago - School of Business - Department of Economics ( email )

PO Box 56
Dunedin
New Zealand
+64 3 479 5296 (Phone)

John A. Goddard

University of Wales, Swansea ( email )

Singleton Park
Swansea, Wales SA2 8PP
United Kingdom

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