Disequilibrium Sports Economics

Disequilibrium Sports Economics

Competitive Imbalance and Budget Constraints

New Horizons in the Economics of Sport series

For decades, sports economics has been set within the framework of equilibrium economics, in particular when modelling team sport leagues. Based on a conviction that this does not reflect real life, this book addresses a gap in the literature and opens up a new research area by applying concepts drawn from disequilibrium economics. It is divided into two parts, the first of which focuses on economic disequilibrium in sports markets and competitive imbalance in sporting contests. The second part concentrates on soft budget constraints and their consequences for club governance and management.

Chapter 2: An attempt at disequilibrium modelling a team sports league

Wladimir Andreff

Subjects: economics and finance, sports

Extract

This chapter attempts to show how beneficial it would be to drop some simplifying and unrealistic assumptions that underlie the standard equilibrium model of a team sports league that have prevailed in the sports economics literature so far. Its aim is not only to discuss how to better adjust economic modelling to empirical evidence, in particular in the case of open leagues, but also to pave the way for an alternative disequilibrium model of – and approach to – team sports leagues. The next section briefly describes the core relationships that are found in the standard model of a North American closed league with profit-maximizing teams and a European open league with win-maximizing teams. It discusses why some of the most crucial assumptions underlying this model are extremely restrictive from the viewpoint of both general theoretical modelling and fitness to empirical evidence of open team sports leagues. The following section elaborates, step by step, on a new, though simple, disequilibrium model of an open team sports (football) league with two markets – one for talent and one for the league’s final product – that does not rely on the restrictive assumptions of the standard equilibrium model. The final section assesses how much this first attempt at modelling is far from a comprehensive disequilibrium model of a team sports league given all the different interacting markets that are found in the real economic life of European football leagues.

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