nep-spo New Economics Papers
on Sports and Economics
Issue of 2006‒09‒16
three papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Revenue Sharing in MLB: The Effect on Player Transfers By Joel G. Maxcy
  2. Organisational Forms in Professional Cycling - Efficiency Issues of the UCI Pro Tour By Rebeggiani, Luca; Tondani, David
  3. Seemingly Irrelevant Events Affect Economic Perceptions and Expectations: The FIFA World Cup 2006 as a Natural Experiment By Thomas Dohmen; Armin Falk; David Huffman; Uwe Sunde

  1. By: Joel G. Maxcy (Department of Kinesiology, University of Georgia)
    Abstract: The 1997 collective bargaining agreement between the Major League Baseball owners and players’ union considerably altered the system of revenue redistribution. This system, a convoluted cross-subsidization system, known as the “split pool plan”, was designed to progressively redistribute income from the highest revenue generating teams toward the lowest revenue-producing clubs. The 2003 agreement extended the basic system of revenue redistribution, but increased the tax rate to 34%, and modified the nature of the redistribution. The purpose of the revenue sharing system was to alleviate a growing disparity in revenue generation, which MLB claims is continuing to cause increased levels of competitive imbalance. The new scheme is examined theoretically within the principal-agent framework, which shows that the incentive to divest in talent is increased for low revenue clubs. Empirical results are supportive. Payroll disparity and competitive imbalance increased modestly from the period immediately preceding implementation. Most striking however is a significant increase in the rate that productive players have transferred away from low revenue teams. This strongly suggests that these teams were acting on the increased incentives to divest in talent.
    Keywords: Sport, revenue redistribution, collective bargaining
    JEL: J50 L20 L83
    Date: 2006–09
  2. By: Rebeggiani, Luca; Tondani, David
    Abstract: This paper gives a first economic approach to pro cycling and analyses the changes induced by the newly introduced UCI Pro Tour on the racing teams\u2019 behaviour. We develop an oligopolistic model starting from the well known Bertrand and Cournot frameworks to analyse if the actual setting of the UCI Pro Tour leads to a partially unmeant behaviour of the racing teams. In particular, we show that the blamed regional concentration of their race participation depends on a lack of incentives stemming from the licence assignation procedure. Our theoretical results are supported by empirical data concerning the performance of the racing teams in 2005. As a recommendation for future improvements, we derive from the model the need for a relegation system for racing teams.
    Keywords: Sports economics, professional cycling, oligopolistic competition
    JEL: L83 D43
    Date: 2006–08
  3. By: Thomas Dohmen (IZA Bonn); Armin Falk (IZA Bonn and University of Bonn); David Huffman (IZA Bonn); Uwe Sunde (IZA Bonn and University of Bonn)
    Abstract: Prominent economic theories have emphasized the role of commonly held perceptions and expectations for determining macroeconomic outcomes. A key empirical question is how such collectively held beliefs are formed. We use the FIFA World Cup 2006 as a natural experiment. We provide direct evidence that seemingly irrelevant events (the outcomes of soccer matches) can systematically affect individual perceptions about economic prospects, both on a personal and economy-wide level.
    Keywords: expectation formation, sunspots, soccer world cup, macroeconomic outcomes, psychology
    JEL: D8 D0 E0
    Date: 2006–08

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