ECON 142 Lecture Notes - Lecture 3: Revenue Sharing, Natural Experiment, Coase Theorem
21 Jun 2020
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Document Summary
Closed leagues worry about their overall product. Suppose that some large market teams have the potential to draw a significant following from a given level of success while smaller teams will draw only a relatively small following. Self-interested behavior, they claim, will cause the large market teams to dominate the competition to the point where it becomes too predictable causing demand to fall below the level that maximizes joint profits (and consumer interest) . One widely advanced solution to this perceived problem is to share revenues and so provide relatively equal opportunities . Simon rottenberg"s celebrated (1956) article examined this issue and presented the team owner"s rationale. As long as there"s at least a slim probability of either team winning, fans remain interested. For example, the amount of fan interest in the first two rounds of the ncaa tournament or regular season college football, two venues of runaway competitive imbalance, yet also two of the most popular american sporting spectacles.
