Spillovers in Sports Leagues with Promotion and Relegation. (February 2015)

• Record Type: Journal Article
• Authors: Dietl, Helmut; Grossmann, Martin; Hefti, Andreas; Lang, Markus
• Is Part Of: Scottish journal of political economy. Volume 62:Number 1(2015)
• Page Start: 59
• Page End: 74
• Publication Date: 2015-02
• Subjects: Great Britain -- Economic conditions -- 1945-1964 -- Periodicals; Great Britain -- Economic conditions -- 1964-1979 -- Periodicals; Great Britain -- Economic conditions -- 1979-1997 -- Periodicals; 330.9411005
• DOI: 10.1111/sjpe.12060
• Languages: English
• ISSNs: 0036-9292

Abstract

<abstract abstract-type="main" id="sjpe12060-abs-0001"> <title>Abstract</title> <p>This paper analyzes spillover effects in sports leagues that are embedded in a system of promotion and relegation. Based on a contest model of a professional sports league with a top division and a second division, we show that league prizes and club efficiencies have opposing effects; while a stronger second division that offers a higher league prize leads to a more balanced top division, the opposite is true for a stronger second division whose clubs become more cost efficient. Moreover, we demonstrate that a higher second‐division prize induces a lower investment level, but higher profits in the top division, while higher club efficiency in the second division leads to both a lower investment level and lower profits in the top division. These results have important policy implications for the organization of sports leagues.</p> </abstract>