Abstract

This paper revisits existing theory of competitive balance in sports leagues using basic Quirk-Fort-Vrooman (QFV) profit-max theory for closed and open leagues with adaptations for win-max sportsmen (sportsman effect).The analysis addresses the impact of revenue sharing and salary caps in profit-max and win-max leagues on competitive balance, team revenues, player costs, club profit and fan welfare. Theoretical propositions are followed by empirical evidence on the effects of salary caps, revenue sharing and media revenue on optimum competitive balance in the Big 4 North American sports leagues and the Big 5 European football leagues.

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