Abstract
Professional sports leagues have witnessed the appearance of so-called daddies - people who invest enormous amounts of money into clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a sugar daddy alters competitive balance and social welfare compared to a league with purely profit-maximizing club owners. We further show that the welfare effect of revenue sharing in a sugar daddy league is ambiguous and depends on the degree of redistribution and on whether the sugar daddy invests in a small or large club.
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