A Dynamic Analysis of Equal Revenue Sharing and Endogenous Salary Caps in the N-Team Leagues. (June 2023)

• Record Type: Journal Article
• Authors: Fujimoto, Masaki
• Is Part Of: Journal of sports economics. Volume 24:Number 5(2023)
• Page Start: 624
• Page End: 638
• Publication Date: 2023-06
• Subjects: sports leagues -- competitive balance -- talent investment -- revenue sharing -- salary caps; Sports -- Economic aspects -- Periodicals; Sports administration -- Periodicals; 338.47796
• DOI: 10.1177/15270025221143983
• Languages: English
• ISSNs: 1527-0025

Abstract

This article studies the combined effect of equal revenue sharing and endogenous salary caps in a dynamical setting. It is shown that (i) a combination of equal revenue sharing and salary caps cannot eliminate competitive imbalance in the league; (ii) the share of player salaries has no impact on the distribution of talent among teams; (iii) under equal revenue sharing, the introduction of salary restrictions is not meant to prevent player salaries from rising, but to prevent them from falling; and (iv) under equal revenue sharing and salary caps, the reverse-order draft is incompatible with talent investment incentives of teams.