Year: 2009
Type: article
Abstract: This article develops a contest model to compare social welfare in homogeneous leagues in which all clubs maximize identical objective functions with mixed leagues in which clubs maximize different objective functions. We show that homogeneous leagues in which all clubs are profit maximizers dominate all other leagues. Mixed leagues in which small‐market clubs are profit maximizers and large‐market clubs are win maximizers (type‐I mixed leagues) are dominated by all other leagues. From a welfare perspective, large‐market clubs win too often in (purely) win‐maximizing and type‐I mixed leagues; whereas, small‐market clubs win too many games in (purely) profit‐maximizing leagues and in mixed leagues in which large‐market clubs are profit maximizers and small‐market clubs are win maximizers (type‐II mixed leagues). These results have important policy implications: Social welfare will increase if clubs are reorganized from non‐profit member associations to profit‐maximizing corporations. Moreover, we show that revenue sharing decreases (increases) social welfare in mixed (homogeneous) leagues.
Source: Southern Economic Journal
Authors: Helmut M. Dietl, Markus Lang, Stephan Werner
Institutions: University of Zurich, University of Lausanne
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2060376436