Labour Markets in Professional Sports

Abstract

Important elements of supply and demand are starkly observable in professional athletics. Demand affects how pay varies with personal productivity, racial discrimination, the nature of factor substitutions, and player mobility. Property rights affect the supply of athletic talent, arms races and incentives to restrict competition. In sports, excess incentives to win can create negative externalities. Collective agreements such as reverse‐order drafts, payroll caps and revenue sharing constrain these forces, but redistribute rents from talented players to owners because they punish success. The European approach–promoting better‐performing teams and relegating those with the poorest records–punish failure.