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Journal of Sports Economics
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Revenue Sharing, Conjectures, and Scarce Talent in a Sports League Model

Stephen T. Easton

Simon Fraser University

Duane W. Rockerbie

University of Lethbridge

This article develops a model of a representative professional sports club operating in a league that has the option of adopting one of two different forms of revenue sharing: traditional revenue sharing or central-pool-type revenue sharing. To adopt either form of revenue sharing, the league requires tehat a majority of clubs increase their profit with adoption of the plan. We derive necessary conditions for either plan to garner enough support for a majority vote. The likelihood of forming a majority depends on the distribution of team revenues and the conjectures on acquiring talent that clubs possess. Competitive conjectures make the adoption of revenue sharing more likely, whereas cartel conjectures make its adoption less likely. This may partly explain why salary caps and revenue sharing tend to be used together in some leagues.

Key Words: revenue sharing • talent conjectures • voting

Journal of Sports Economics, Vol. 6, No. 4, 359-378 (2005)
DOI: 10.1177/1527002504267520
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