Welfare Effects of Salary Caps in Sports Leagues with Win-Maximizing Clubs

Helmut Dietl, Egon Franck, Markus Lang and Alexander Rathke

No 825, Working Papers from International Association of Sports Economists, North American Association of Sports Economists

Abstract: This paper studies the welfare effect of a percentage-of-revenue salary cap in a European context with win-maximizing clubs. It shows that a percentage-of-revenue cap increases competitive balance and decreases the overall salary payments in the league, therefore contributing to financial stability. A percentage-of-revenue cap will always increase social welfare if the weight on aggregate club surplus in the welfare function is sufficiently high. Additionally, if fans’ preferences for aggregate talent are sufficiently high then the percentage-of-revenue cap will also increase social welfare; no matter how much weight the league puts on financial stability.

Keywords: Salary Caps; Social Welfare; Competitive Balance; Team Sports League (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-08
New Economics Papers: this item is included in nep-lab, nep-mic and nep-spo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://web.holycross.edu/RePEc/spe/Dietletal_SalaryCaps.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://web.holycross.edu/RePEc/spe/Dietletal_SalaryCaps.pdf [302 Found]--> https://web.holycross.edu/RePEc/spe/Dietletal_SalaryCaps.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spe:wpaper:0825

Access Statistics for this paper

More papers in Working Papers from International Association of Sports Economists Contact information at EDIRC., North American Association of Sports Economists Contact information at EDIRC.
Bibliographic data for series maintained by Victor Matheson ().