Social Welfare in Sports Leagues with Profit-Maximizing and/or Win-Maximizing Clubs

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 dominat...

Full description

Saved in:
Bibliographic Details
Published in:Southern economic journal 2009-10, Vol.76 (2), p.375-396
Main Authors: Dietl, Helmut M., Lang, Markus, Werner, Stephan
Format: Article
Language:English
Subjects:
Clubs
Economics
Economics of sport
Evaluation
Financial investments
Forecasts and trends
Hypotheses
Market equilibrium
Market size
Monopolistic competition
Objective functions
Profit maximization
Profits
Property rights
Revenue
Revenue sharing
Social aspects
Social balance theory
Social clubs
Social service
Social welfare
Sports
Sports associations
Team sports
Welfare economics
Welfare measurement
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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.
ISSN:0038-4038
2325-8012
DOI:10.4284/sej.2009.76.2.375