Free ride, take it easy: An empirical analysis of adverse incentives caused by revenue sharing

Daniel A. Rascher, Mark S. Nagel, Matthew T. Brown, Chad D. McEvoy

Research output: Contribution to journalArticle

2 Scopus citations

Abstract

A fundamental belief in professional sport leagues is that competitive balance is needed to maximize demand and revenues; therefore, leagues have created policies attempting to attain proper competitive balance. Further, research posits that objectives of professional sport teams' owners include some combination of winning and profit maximization. Although the pursuit of wins is a zero sum game, revenue generation and potential profit making is not. This article focuses upon the National Football League's potential unintended consequences of creating the incentive for some teams to free ride on the rest of the league's talent and brand. It examines whether an owner's objectives to generate increased revenues and profits are potentially enhanced by operating as a continual low-cost provider while making money from the shared revenues and brand value of the league. The present evidence indicates that, overall, being a low-cost provider is more profitable than increasing player salaries in an attempt to win additional games.

Original languageEnglish (US)
Pages (from-to)373-390
Number of pages18
JournalJournal of Sport Management
Volume25
Issue number5
DOIs
StatePublished - 2011

ASJC Scopus subject areas

  • Decision Sciences(all)
  • Orthopedics and Sports Medicine
  • Physical Therapy, Sports Therapy and Rehabilitation
  • Organizational Behavior and Human Resource Management

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