Chapter 1: Two to tango: optimum competitive balance in professional sports leagues
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According to received theory, the perfect game is a symbiotic contest between equal opponents. The practical economic problem is that professional sports leagues form imperfectly competitive natural cartels where games are played between teams with asymmetric market power. In the realm of pure theory the natural duality of sports leagues seems to imply that dominant teams are really only as strong as their weakest opponents. In the real world, however, the success of unbalanced leagues dominated by a few perennially powerful clubs raises the important empirical question as to whether optimal competitive balance may obtain at less than absolute team equality. The economics of sports has been preoccupied with two prescient propositions from Rottenberg’s classic paper on the baseball players’ labor market. The first argument centers on the invariance proposition that free agency for baseball players would yield the same talent distribution as the reserve system (since 1876) that bound a player to one team for life. In its strong form the invariance proposition holds that revenue sharing has no effect on talent distribution and it serves only to deepen player exploitation.

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