Revenue Sharing and Competitive Balance in Professional Team Sports

Abstract

The aim of this article is to clarify the apparent confusion in the literature about the impact of a revenue sharing arrangement on the competitive balance in a sports league. A crucial factor in the discussion seems to be the impact of the absolute rather than the relative quality of the teams on the clubs' revenues. The analysis shows that revenue sharing improves the competitive balance under both the profit- and the utility-maximizing hypotheses.