Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Monday, December 17, 2012

Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America

Posted by D. Daniel Sokol

XiaoGang Che (University of Alberta, Department of Economics) and Brad Humphreys (University of Alberta, Department of Economics) address Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America.

ABSTRACT: We analyze the formation of rival leagues in professional team sports, one of the least studied forms of competition in sport. We survey the economic history of professional sports leagues in North America and develop stylized facts about rival league formation and develop a game-theoretic model of entry of a rival league to an existing market to explain these stylized facts. This model accounts for the strategic interaction between the incumbent and rival league and costs associated with acquiring new players from the incumbent league. The model predicts that either expanding to deter rival league formation, or allowing a rival league to form and then merging with that league is a subgame perfect equilibrium, and that incumbent leagues will pay players relatively high salaries to deter entry by a rival league.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/12/competition-between-sports-leagues-theory-and-evidence-on-rival-league-formation-in-north-america-.html

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Comments

A sports league is a group of sports teams or individual athletes that compete against each other in a specific sport.

Posted by: onychoschizia | Dec 17, 2012 3:08:53 AM

The design forecasts that either growing to dissuade competing group development, or enabling a competing group to form and then consolidating with that group is a subgame perfect equilibrium.

Posted by: Burg Watches Outlets | Dec 25, 2012 9:20:45 PM

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