Competition Among National Football Leagues. Does It Exist? Should We Regulate?

Abstract

It is often supposed that the stakeholders of a national football league draw more satisfaction from their sport if the league is balanced, that is, if a large number of clubs have a reasonable chance of winning. This is the so-called Competitive balance hypothesis. This hypothesis can be challenged, however, in the context of international competition like the European champions league. It could be that the utility of national leagues' stakeholders would be higher if the probability of victory for their nation's club at the international level were higher. If this were the case, a league's governing body intending to maximize the quality of the national league by making use of redistributive schemes would face a trade-off between national competitive balance and international performance of the national representative club. We propose a simple microeconomic framework to model this trade-off. If a non-cooperative game exists among the national league governing bodies, whether it is a Nash or a Stackelberg one, this game would result in inefficient redistributive policies. We find ‘soft’ empirical evidence of such a competition among the big 5 football leagues in Europe. This result supports the idea of the creation of an international regulatory body. We derive the conditions under which the international regulatory body should ensure that the leagues' governing bodies implement redistributive schemes guaranteeing the respect of the national competitive balance. We also emphasize the risk of experiencing a drop in the quality of leagues if one of them becomes too big relatively to the others, what we call the tragedy of the wealthy.