Economics of Antitrust

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Antitrust Law ◽  
Competitive Balance ◽  
Sports Teams ◽  
Sherman Act ◽  
Professional Team Sports ◽  
Sports Leagues ◽  
Professional Sports Leagues

This chapter examines the economics of antitrust, with particular emphasis on how antitrust law affects professional team sports. In the late 1800s, Americans worried about the growing concentration of power in the hands of a few producers such as Standard Oil, American Tobacco, and other large firms that consolidated their holds over industries by merging and acquiring other companies. Other industrial leaders sought to fix prices above those obtained under competition. The Sherman Antitrust Act, enacted in 1890, contains provisions addressing “contract,” “conspiracy,” and “trade and commerce.” This chapter first considers how courts applied the Sherman Act to cases involving professional team sports before discussing the characteristics of professional sports leagues, how owners of professional sports teams reported profits and losses, the issue of player salaries and exploitation, and competitive balance and revenue sharing in professional leagues. It also describes franchise relocation and expansion and how television created demand in sports.

Player Rights 1951 and 1957

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Team Sports ◽  
Professional Sports ◽  
Congressional Hearings ◽  
Professional Team Sports ◽  
Sports Leagues ◽  
Professional Sports Leagues

This chapter examines one of the most contentious issues in professional sports leagues that were tackled at the Congressional hearings in 1951 and 1957: player rights. The reserve clause and the player draft allowed owners to minimize competition for players and therefore to have salary-setting power over their players, giving them discretion in how much they paid them. Owners and their commissioners employed novel arguments supporting the necessity of having the reserve clause. This chapter first provides an overview of the sorry state of player salaries in professional team sports before considering the owners' explicit use of the reserve clause and how players began challenging it. It concludes with a discussion of Congress's inquiry into player rights, the challenges to the player draft, the formation of players' associations, the outcome of the hearings, and the inquiry's impact on owner-player relations.

Player Mobility and Competitive Balance Regulation in Professional Sports Leagues

2021 ◽  
pp. 152700252110595
Author(s):  
Marco Runkel
Keyword(s):  
North American ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Competitive Balance ◽  
Extended Version ◽  
Sports Leagues ◽  
The Difference ◽  
Salary Caps ◽  
Professional Sports Leagues

Competitive balance regulation is more widespread in North American than in Europan sports leagues. The present paper addresses the question whether this observation can be explained with the help of differences in the degree of player mobility. Using an extended version of the workhorse contest model of sports leagues, the paper shows that the answer depends on the kind of competitive balance regulation. While player mobility may help to explain the difference with respect to salary regulation (e.g., salary caps), the choice of revenue sharing schemes turns out to be independent of player mobility.

scholarly journals A Contest Model of a Professional Sports League with Two-Sided Markets

2012 ◽  
Vol 232 (3) ◽  
Author(s):  
Helmut Dietl ◽  
Tobias Duschl ◽  
Egon Franck ◽  
Markus Lang
Keyword(s):  
Network Effects ◽  
Network Externalities ◽  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Market Potential ◽  
Competitive Balance ◽  
Professional Team Sports ◽  
Negative Effect ◽  
Two Sided Markets

SummaryThis paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a two-stage contest model. In professional team sports, the competition of the clubs functions as a platform that enables sponsors to interact with fans. In these club-mediated interactions, positive network effects operate from the fan market to the sponsor market, while positive or negative network effects operate from the sponsor market to the fan market. We show that the size of these network effects determines the level of competitive balance within the league. If the market potential of the sponsors is small (large), competitive balance increases (decreases) with stronger combined network effects. We further deduce that clubs benefit from stronger combined network effects through higher profits and that network externalities can mitigate the negative effect of revenue sharing on competitive balance. Finally, we derive implications for improving competitive balance by taking advantage of network externalities. For example, our model suggests that an increase in the market potential of sponsors produces a more balanced league.

scholarly journals Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues

2011 ◽  
Vol 13 (2) ◽  
pp. 1-30 ◽  
Author(s):  
Helmut M. Dietl ◽  
Tobias Duschl ◽  
Markus Lang
Keyword(s):  
Level Structure ◽  
Team Sports ◽  
Professional Sports ◽  
Executive Pay ◽  
Corporate Sector ◽  
Sports Industry ◽  
Professional Team Sports ◽  
Sports Leagues ◽  
Regulatory Measures ◽  
Professional Sports Leagues

Executive pay regulation is widely discussed as a measure to reduce financial mismanagement in corporations. We show that the professional team sports industry, the only industry with substantial experience in the regulation of compensation arrangements, provides valuable insights for the regulation of executive pay. Based on the experience from professional sports leagues, we develop implications for the corporate sector regarding the establishment and enforcement of executive pay regulation as well as the level, structure, and rigidity of such regulatory measures.

scholarly journals Revenue Sharing in Major League Baseball: The Moments That Meant so Much

2018 ◽  
Vol 6 (3) ◽  
pp. 71 ◽  
Author(s):  
Duane Rockerbie ◽  
Stephen Easton
Keyword(s):  
Major League Baseball ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Higher Order ◽  
Risk Averse ◽  
Positive Effects ◽  
Small Market ◽  
Major League ◽  
Sports Leagues ◽  
Professional Sports Leagues

Revenue sharing is a common league policy in professional sports leagues. Several motivations for revenue sharing have been explored in the literature, including supporting small market teams, affecting league parity, suppressing player salaries, and improving team profitability. We investigate a different motivation. Risk-averse team owners, through their commissioner, are able to increase their utility by using revenue sharing to affect higher order moments of the revenue distribution. In particular, it may reduce the variance and kurtosis, as well as affecting the skewness of the league distribution of team local revenues. We first determine the extent to which revenue sharing affects these moments in theory, then we quantify the effects on utility for Major League Baseball over the period 2002–2013. Our results suggest that revenue sharing produced significant utility gains at little cost, which enhanced the positive effects noted by other studies.

A Look Back at the Hearings

2017 ◽  
Author(s):  
David George Surdam
Keyword(s):  
Professional Sports ◽  
Revenue Sharing ◽  
Financial Data ◽  
Free Agency ◽  
Congressional Hearings ◽  
Look Back ◽  
Sports Leagues ◽  
Territorial Rights ◽  
Shed Light ◽  
Professional Sports Leagues

This conclusion discusses the aftermath of the Congressional hearings. During the hearings, the owners' general prerogatives survived essentially intact, although free agency of some sort was imminent in all sports by 1976. Legislators did not repudiate the reserve clause, the reverse-order draft, or territorial rights, despite their qualms regarding these institutions. The legislators and their aides missed some opportunities to subject the team financial data from the 1950s to analysis, which could have shed light on such questions as the effects of revenue sharing. Some fans gained when their hometown landed an expansion or existing franchise, while other fans lost when legislators did not prevent franchise relocation. Congress has held several hearings in the intervening decades since 1989. The professional sports leagues have also evolved. Technology has altered the landscape.

Competitive Balance in Team Sports and the Impact of Revenue Sharing

2006 ◽  
Vol 20 (1) ◽  
pp. 39-51 ◽  
Author(s):  
Stefan Kesenne
Keyword(s):  
Economic Theory ◽  
Relative Size ◽  
Team Sports ◽  
Professional Sports ◽  
Revenue Sharing ◽  
Competitive Balance ◽  
The Impact ◽  
Uncertainty Of Outcome

This article uses economic theory to examine the variables that affect the competitive balance in a professional sports league and the impact of revenue sharing. The generally accepted proposition that revenue sharing does not affect the competitive balance in a profi t-maximizing league has been challenged by many. It is shown that the competitive balance and the impact of revenue sharing not only depend on the relative size of the market of the clubs, but that they are also affected by the objectives of the club owners and the importance to spectators of absolute team quality and uncertainty of outcome. Furthermore, the clubs’ hiring strategies, including the talent supply conditions, turn out to be important elements affecting competitive balance and the impact of revenue sharing.

The Impact of Free Agency on Competitive Balance in North American Professional Team Sports Leagues

2006 ◽  
Vol 20 (3) ◽  
pp. 345-365 ◽  
Author(s):  
Joel Maxcy ◽  
Michael Mondello
Keyword(s):  
National Football League ◽  
Team Sports ◽  
National Hockey League ◽  
Competitive Balance ◽  
Free Agency ◽  
Free Agent ◽  
Professional Team Sports ◽  
Dependent Variables ◽  
Sports Leagues ◽  
The Impact

Free agency was reintroduced to professional team sport leagues in the 1970s. Sport enthusiasts expressed concern that competitive balance would diminish as star players congregated to large market cities. However, the economic invariance principle rejects this notion, indicating that balance should remain unchanged. This article empirically examines the effects of changes in free agent rules on competitive balance over time in the National Basketball Association (NBA), National Football League (NFL), and National Hockey League (NHL). Regression analysis using within-season and between-season measures of competitive balance as dependent variables provides mixed results. The NFL and NHL provide evidence that an aspect of competitive balance has improved, but results from the NBA indicate that balance has worsened since the introduction of free agency. We conclude that the ambiguous results suggest that the effects are not independent, but instead depend on the interaction of free agent rights with other labor market and league rules.

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