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The effect of marginal cost elasticity on competitive balance


Grossmann, Martin; Dietl, Helmut; Trinkner, Urs (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.

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.

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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
Scopus Subject Areas:Social Sciences & Humanities > Economics, Econometrics and Finance (miscellaneous)
Language:English
Date:2008
Deposited On:28 Aug 2019 15:10
Last Modified:13 May 2020 23:11
Publisher:Sage Publications
ISSN:1527-0025
OA Status:Closed
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1177/1527002507310959
Other Identification Number:merlin-id:7974

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