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Spillovers in Sports Leagues with Promotion and Relegation


Dietl, Helmut; Grossmann, Martin; Hefti, Andreas; Lang, Markus (2015). Spillovers in Sports Leagues with Promotion and Relegation. Scottish Journal of Political Economy, 62(1):59-74.

Abstract

This paper analyzes spillover effects in sports leagues that are embedded in a system of promotion and relegation. Based on a contest model of a professional sports league with a top division and a second division, we show that league prizes and club efficiencies have opposing effects; while a stronger second division that offers a higher league prize leads to a more balanced top division, the opposite is true for a stronger second division whose clubs become more cost efficient. Moreover, we demonstrate that a higher second-division prize induces a lower investment level, but higher profits in the top division, while higher club efficiency in the second division leads to both a lower investment level and lower profits in the top division. These results have important policy implications for the organization of sports leagues

Abstract

This paper analyzes spillover effects in sports leagues that are embedded in a system of promotion and relegation. Based on a contest model of a professional sports league with a top division and a second division, we show that league prizes and club efficiencies have opposing effects; while a stronger second division that offers a higher league prize leads to a more balanced top division, the opposite is true for a stronger second division whose clubs become more cost efficient. Moreover, we demonstrate that a higher second-division prize induces a lower investment level, but higher profits in the top division, while higher club efficiency in the second division leads to both a lower investment level and lower profits in the top division. These results have important policy implications for the organization of sports leagues

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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:28 February 2015
Deposited On:30 Aug 2019 09:08
Last Modified:25 Sep 2019 00:44
Publisher:Wiley-Blackwell Publishing, Inc.
ISSN:0036-9292
OA Status:Closed
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1111/sjpe.12060
Other Identification Number:merlin-id:18110

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