The Economics of Professional Team Sports

A detailed survey of the economic literature on sporting leagues, the demand for professional team sports and the players' labor market.

List of figures

ix

List of tables

xi

Acknowledgements

xiii

Introduction

1

(10)

Why are professional team sports of interest to economists?

1

(2)

The need for a textbook

3

(2)

Economic methodology

5

(1)

Summary of chapters

6

(5)

SECTION A The market, industry and firm in professional team sports

11

(56)

The market structure of professional team sports leagues: general themes

13

(14)

Introduction

13

(1)

Market structures: a brief overview

13

(5)

Externalities

18

(2)

The peculiar economics of sport

20

(1)

The uncertainty of outcome hypothesis as an organising principle

21

(4)

Conclusions

25

(1)

Discussion questions

25

(2)

The market structure of professional team sports leagues: the firm in professional team sports

27

(15)

Introduction

27

(1)

Club objectives: profit maximisation versus utility maximisation

27

(4)

Sporting leagues as cartels

31

(1)

Coping with interdependence: cartel or monopoly?

32

(4)

Cartel-based explanations of sporting league developments

36

(4)

Conclusions

40

(1)

Discussion questions

40

(2)

Cross-subsidisation in professional team sports leagues

42

(25)

Introduction

42

(1)

The rationale for cross-subsidisation

43

(3)

Cross-subsidisation policies

46

(3)

An economic framework for understanding cross-subsidisation

49

(4)

Empirical evidence on competitive balance

53

(3)

Empirical evidence on the effects of cross-subsidisation policies

56

(2)

The Coase theorem and professional team sports leagues

58

(2)

Conclusions

60

(5)

Appendix 4.1: measuring competitive balance in sporting leagues

61

(3)

Appendix 4.2: competitive balance in sporting leagues under revenue sharing

64

(1)

Discussion questions

65

(2)

SECTION B The demand for professional team sports

67

(114)

Theoretical and empirical issues

69

(31)

Introduction

69

(1)

The theory of demand

69

(1)

The utility function

70

(1)

The budget constraint

71

(4)

Modelling demand: regression analysis

75

(11)

Measuring demand: some key conceptual and data issues

86

(4)

Case study: Scottish professional football and the uncertainty of outcome hypothesis

90

(4)

Conclusions

94

(5)

Appendix 5.1: problems of measuring habit persistence

94

(5)

Discussion questions

99

(1)

Traditional findings and new developments

100

(30)

Introduction

100

(1)

The traditional emphasis of demand studies

100

(2)

Major findings in the literature: sporting versus economic determinants of demand

102

(15)

The long-run determinants of demand: culture, habit persistence and economic effects revisited

117

(6)

Conclusions

123

(6)

Appendix 6.1: time-series econometrics, error correction models and cointegration

124

(5)

Discussion questions

129

(1)

The uncertainty of outcome hypothesis: theoretical and empirical issues

130

(27)

Introduction

130

(1)

The nature of uncertainty of outcome

131

(17)

Conclusions

148

(7)

Appendix 7.1: some properties of uncertainty of outcome indicators

149

(6)

Discussion questions

155

(2)

Broadcast demand and the impact of television

157

(24)

Introduction

157

(1)

A brief history of televised sport: the US and UK

157

(6)

The economics of broadcasting and sport

163

(1)

Television and the demand for professional team sports

164

(4)

Television and competitive balance

168

(2)

Potential changes in league structure: European Super League

170

(3)

The evolution of the media market

173

(5)

Conclusions

178

(1)

Discussion questions

178

(3)

SECTION C The labour market in professional team sports

181

(58)

The traditional view: theory and evidence

183

(20)

Introduction

183

(1)

Some benchmark economic concepts of labour markets: the case of perfect competition

183

(3)

Theories of player labour markets

186

(3)

Case study: US baseball

189

(11)

Conclusions

200

(2)

Appendix 9.1: the principles of derived demand

200

(2)

Discussion questions

202

(1)

Recent developments: theory and evidence

203

(32)

Introduction

203

(1)

The move to increased player power: the rise of free agency in the US

203

(3)

Free agency in the UK and the Bosman ruling

206

(3)

Implications of free agency for professional team sports

209

(1)

The players' labour market

209

(1)

Bargaining theory

210

(3)

Empirical findings

213

(9)

Implications of free agency for league policy

222

(2)

Conclusions

224

(9)

Appendix 10.1: the Nash bargaining model

224

(1)

Appendix 10.2: human capital theory

225

(6)

Appendix 10.3: a model of final-offer arbitration

231

(2)

Discussion questions

233

(2)

Conclusions

235

(4)

A brief review of chapters

235

(2)

Evaluation of the Louis--Schmeling paradoxluncertainty of outcome hypothesis

237

(1)

Implications for future research

238

(1)

Bibliography

239

(6)

Index

245

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The Economics of Professional Team Sports

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Table of Contents

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