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The effect of marginal cost elasticity on competitive balance


Dietl, H; Grossmann, M; Trinkner, U (2008). The effect of marginal cost elasticity on competitive balance. Journal of Sports Economics, 9(4):339-350.

Abstract

This article presents a model of talent investments where two clubs compete for prizes. Our model is based on a general class of cost functions with a constant elasticity of marginal costs with respect to investments. The analysis finds that reduced revenue sharing improves competitive balance. Furthermore, we show that a higher elasticity of marginal costs with respect to investments enhances competitive balance and simultaneously reduces the negative effect of revenue sharing on competitive balance.

This article presents a model of talent investments where two clubs compete for prizes. Our model is based on a general class of cost functions with a constant elasticity of marginal costs with respect to investments. The analysis finds that reduced revenue sharing improves competitive balance. Furthermore, we show that a higher elasticity of marginal costs with respect to investments enhances competitive balance and simultaneously reduces the negative effect of revenue sharing on competitive balance.

Citations

3 citations in Web of Science®
4 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:August 2008
Deposited On:23 Jan 2009 16:19
Last Modified:05 Apr 2016 12:51
Publisher:Sage Publications
ISSN:1527-0025
Publisher DOI:10.1177/1527002507310959

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