nep-spo New Economics Papers
on Sports and Economics
Issue of 2007‒09‒02
five papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. The Effect of Salary Caps on Social Welfare By Helmut Dietl; Markus Lang; Alexander Rathke
  2. Sports and the Law: Using Court Cases to Teach Sports Economics By Victor Matheson
  3. Riding High - Success in Sports and the Rise of Doping Cultures By Strulik, Holger
  4. Communication, cooperation and collusion in team tournaments - An experimental study By Sutter, Matthias; Strassmair, Christina
  5. How does Club's Organizational Design Affect Competition Among Clubs? By Prufer, J.; Walz, U.

  1. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Alexander Rathke (Institute for Empirical Research in Economics, University of Zurich)
    Abstract: Increasing financial disparity and spiralling wages in European football have triggered a debate about the introduction of salary caps. This paper provides a theoretical model of a team sports leagues and studies the welfare effect of salary caps. It shows that salary caps will increase competitive balance and decrease overall salary payments within the league. The resulting effect on social welfare is counter-intuitive and depends on the preference of fans for aggregate talent and for competitive balance. A salary cap that binds only for large market clubs will increase social welfare if fans prefer aggregate talent despite the fact that the salary cap will result in lower aggregate talent. If fans prefer competitive balance, on the other hand, any binding salary cap will reduce social welfare.
    Keywords: Salary Caps, Social Welfare, Competitive Balance, Team Sports League
    JEL: L83
    Date: 2007–08
  2. By: Victor Matheson (Department of Economics, College of the Holy Cross)
    Abstract: The purpose of this paper is two-fold. First, it lays forth a rationale for the use of court cases in teaching a sports economics class. Second, it provides an overview of the most important cases related to sports economics. Court classes allow students to develop critical reading and reasoning skills while allowing the instructor to present readings outside the standard textbook that are accessible to most undergraduates. A sports economics course with a focus on legal issues also broadens the course to fit better within a liberal arts education rather than being a narrow speciality field.
    Keywords: sports, court cases, legal economics
    JEL: L83 K21 K31 K40
    Date: 2007–09
  3. By: Strulik, Holger
    Abstract: This article develops a socio-economic model that analyzes the doping decision of professional athletes. In their decision to use performance enhancing drugs athletes do not only evaluate the costs and benefits (in terms of potential rank improvement). They also take into account peer-group approval of using drugs. Peer-group approval is modelled as a lagged endogenous variable that depends on the share of drug using athletes in the history of a sport. This way, the model can explain multiple equilibria as "doping cultures". Besides the comparative statics of the equilibrium (how can a doping culture be eliminated?) the article also investigates how the doping decision is affected by standards set by the respective leader in a sport, e.g. Olympic qualification marks, and by the taste of victory, i.e. the disproportionate public veneration of winners.
    Keywords: sport, doping, approval, social dynamics, weak athletes, superheroes
    JEL: A13 D71 K40 L83 M50
    Date: 2007–08
  4. By: Sutter, Matthias; Strassmair, Christina
    Abstract: We study the effects of communication in an experimental tournament between teams. When teams, rather than individuals, compete for a prize there is a need for intra-team coordination in order to win the inter-team competition. Introducing communication in such situations may have ambiguous effects on effort choices. Communication within teams may promote higher efforts by mitigating the internal free-rider problem. Communication between competing teams may lead to collusion, thereby reducing efforts. In our experiment we control the channels of communication by letting subjects communicate through an electronic chat. We find, indeed, that communication within teams increases efforts and communication between teams reduces efforts. We use team members’ dialogues to explain these effects of communication, and check the robustness of our results.
    Keywords: Tournament; Team decision making; Communication; Collusion; Free-riding; Experiment
    JEL: C92 J33
    Date: 2007–08
  5. By: Prufer, J.; Walz, U. (Tilburg University, Center for Economic Research)
    Abstract: We analyze competition among clubs in which the status of club members is the crucial added value accruing to fellow club members through social interaction within the club (e.g. in country clubs, academic faculties, or internet communities). In the course of competition for new members, clubs trade off the effect of entry on average status of the club and candidates? monetary payment via an entrance fee. We show that the best candidates join the best clubs but they pay higher entrance fees than some lowerranking candidates. We distinguish among various decision rules and organizational set-ups, including majority voting, unanimity, and meritocracy. We find that, from a second-best welfare perspective, the unanimity rule leads to inefficient exclusion of some candidates, while meritocracy leads to inefficient inclusion. Our main policy implication is that consensus-based clubs, such as many academic faculties in Europe, could improve the well-being of their members if they liberalized their internal decision making processes.
    Keywords: club theory;status organizations;design of decision making;collective action
    JEL: D71 L22 L31
    Date: 2007

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