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Cross-ownership, league policies and player investment across sports leagues

Mongeon, Kevin and Winfree, Jason (2012): Cross-ownership, league policies and player investment across sports leagues.

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Abstract

Although many sports leagues are viewed as monopolies, research suggests that some economic competition exists between teams in different sports leagues. If fans make consumption choices based on the quality of all teams that are present in their region, then economic competition and ownership structure can impact an owner's incentive to invest in talent. This article examines differences between monopolists, duopolists and cross-ownership. Consumer preferences and fan loyalty are allowed to vary across sports, and the winning percentages of teams in other leagues affects demand. Our model shows that economic competition results in an ambiguous level of investment compared to a monopolist. A firm that engages in cross-ownership will invest less in talent compared to a duopolist, but the difference in profits is ambiguous. League policies are studied and are shown to affect the quality of teams in other leagues.

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