Revenue divergence and competitive balance in a divisional sports league

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Dobson, S ; Goddard, J (2004)

The North American model of resource allocation in professional sports leagues is adapted for English (association) football. The theoretical relationship between revenue and competitive balance is shown to be robust with respect to changes in teams’ objectives and labour market conditions. 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 competition suggests an increase in competitive imbalance between teams at different levels of the league’s divisional hierarchy, as the theory suggests.
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