publication . Preprint . 2000

The Sport League's Dilemma: Competitive Balance versus Incentives to Win.

Frederic Palomino and Luca Rigotti.;
Open Access
  • Published: 01 Nov 2000
We analyze a dynamic model of strategic interaction between a professional sport league that organizes a tournament, the teams competing to win it, and the broadcasters paying for the rights to televise it. Teams and broadcasters maximize expected profits, while the league's objective may be either to maximize the demand for the sport or to maximize the teams' joint profits. Demand depends positively on symmetry among teams (competitive balance) and how aggressively teams try to win (incentives to win). Revenue sharing increases competitive balance but decreases incentives to win. Under demand maximization, a performance-based reward scheme (used by European spo...
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