infonet-economy

This paper provides a theoretical model of a team sports league based on contest theory and studies the welfare effect of gale revenue sharing. It derives two counterintuitive results. First, it challenges the "invarianceproposition" by showing that revenue
sharing reduces competitive balance and thus produces a more unbalanced league. Second, the paper concludes that a lower degree of competitive balance compared
with the noncooperative league equilibrium yields a higher level of social welfare and club profits. Combining both results, it concludes that gate revenue sharing increases social welfare and club profits in our model.