Estimating the Value of Brand Alliances in Professional Team Sports

Abstract

Brands often form alliances to enhance their brand equities. In this paper, we examine the alliances between professional athletes (athlete brands) and sports teams (team brands) in the National Basketball Association (NBA). Athletes and teams match to maximize the total added value created by the brand alliance. To understand this total value, we estimate a structural two-sided matching model using a maximum score method. Using data on the free-agency contracts signed in the NBA during the four-year period from 1994 to 1997, we find that both older players and players with higher performance are more likely to match with teams with more wins. However, controlling for performance, we find that brand alliances between high brand equity players (defined as receiving enough votes to be an all-star starter) and medium brand equity teams (defined by stadium and broadcast revenues) generate the highest value. This suggests that top brands are not necessarily best off matching with other top brands. We also provide suggestive evidence that the maximum salary policy implemented in 1998 influenced matches based on brand equity spillovers more than matches based on performance complementarities.