Competitive Balance when Teams have Different Goals
Department of Law
October 2, 2006
In the standard two-team model of professional league sports it is shown that if teams have different objectives (the maximization of, respectively, wins and profits) the competitive balance conditions get worse with respect to the case when teams share the same goal. A similar, though less clear-cut, result obtains in the three-team setup. These outcomes call for policy measures to restore the balance. Three such measures are examined here: market-size-based revenue sharing, general salary cap and team-specific salary cap. It is shown that, contrary to the same-goal-for-all case, each of them may bring more intra-league competition.
Number of Pages in PDF File: 27
Keywords: Team sports economics, competitive balance, invariance proposition, Italian football
JEL Classification: D29, L21, L83
Date posted: October 8, 2006