Article

Club Objectives, Competitive Balance, and the Invariance Proposition

Stefan Kesenne

in The Oxford Handbook of Sports Economics

Published in print April 2012 | ISBN: 9780195387773
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780195387773.013.0003

Series: Oxford Handbooks

 Club Objectives, Competitive Balance, and the Invariance Proposition

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This chapter considers the analysis of the competitive balance in a formal model that focuses attention on the nature of the market for talent and the nature of the club owner's objective function, and derives the conditions which have led to the dissenting results about the competitive balance. It then addresses the optimal competitive balance in a league theoretically, and whether a win- or profit-maximizing club comes closest to the social optimum. Next, the chapter deals with the invariance proposition, analyzing the effects of restrictions on player mobility and revenue-sharing arrangements. The most unequal competitive balance can be expected in a league in which the large-market clubs are win maximizers and the small-market clubs are profit maximizers. It is noted that the invariance proposition no longer holds if one of the teams in a league is a win maximizer.

Keywords: competitive balance; invariance proposition; club owner; win maximizers; profit maximizers; player mobility; revenue sharing

Article.  4050 words. 

Subjects: Economics ; Industry Studies ; Financial Institutions and Services

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