Introduction to Symposium on Sports Economics

This is an introduction to the symposium whose papers follow this introduction.

Postal and Regulatory Reform in Intermodal Competition

This paper argues that transforming the postal business model goes hand in hand with a transformation in the definition of universal service obligation. Whilst postal operators need to fully embrace the unique competitive space created by electronic substitution, at the intersection between the physical and digital, regulatory frameworks also must be adapted towards a technology-neutral definition of universal service.Regulation, Postal market, Substitution, Intermodal competition

Developing Universal Postal Services in Latin America – an Economic Perspective

The paper first analyzes if there is a need to develop universal postal services in developing countries. We conclude that postal services serve vital functions in economies now and for the foreseeable future. We then discuss regulatory remedies that will foster the evolution of universal postal services in developing countries.Developing Countries, Universal Postal Services

Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams

This paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-orientated behavior of certain clubs affects talent investments, competitive balance and club profits. Moreover, in contrast to traditional models, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We identify a new effect of revenue sharing called the "sharpening effect". In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.Competitive balance, contest, invariance proposition, objective function, revenue sharing, team sports league, utility maximization

The Effect of Luxury Taxes on Competitive Balance, Club Profits, and Social Welfare in Sports Leagues

This paper provides a game-theoretic model of a professional sports league and analyzes the effect of luxury taxes on competitive balance, club profits and social welfare. We show that a luxury tax increases aggregate salary payments in the league as well as produces a more balanced league. Moreover, a higher tax rate increases the profits of large-market clubs, whereas the profits of small-market clubs only increase if the tax rate is not set inadequately high. Finally, we show that social welfare increases with a luxury tax.Sports League, Luxury Tax, Social Welfare, Competitive Balance

Revenue Sharing and Competitive Balance in a Dynamic Contest Model

This paper presents a dynamic model of talent investments in a team sports league with an infinite time horizon. We show that the clubs' investment decisions and the effects of revenue sharing on competitive balance depend on the following three factors: (i) the cost function of talent investments, (ii) the clubs' market sizes, and (iii) the initial endowments of talent stock. We analyze how these factors interact in the transition to the steady state as well as in the steady state itself.Contest, Sports Economics, Competitive Balance, Revenue Sharing

The Combined Effect of Salary Restrictions and Revenue Sharing on Club Profits, Player Salaries, and Competitive Balance

This article provides a standard "Fort and Quirk"-style model of a professional team sports league and analyzes the combined effect of salary restrictions (caps and floors) and revenue-sharing arrangements. It shows that the invariance proposition does not hold even under Walrasian conjectures if revenue sharing is combined with either a salary cap or a salary floor. In leagues with a binding salary cap for large clubs but no binding salary floor for small clubs, revenue sharing will decrease the competitive balance and increase club profits. Moreover, a salary cap produces a more balanced league and decreases the cost per unit of talent. The effect of a more restrictive salary cap on the profits of the small clubs is positive, whereas the effects on the profits of the large clubs as well as on aggregate profits are ambiguous. In leagues with a binding salary floor for the small clubs but no binding salary cap for the large clubs, revenue sharing will increase the competitive balance. Moreover, revenue sharing will decrease (increase) the profits of large (small) clubs. Implementing a more restrictive salary floor produces a less balanced league and increases the cost per unit of talent. Furthermore, a salary floor will result in lower profits for all clubs.Team sports leagues, invariance proposition, competitive balance, revenue sharing, salary cap, salary floor

Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues

Executive pay regulation is widely discussed as a measure to reduce financial mismanagement in corporations. We show that the professional team sports industry, the only industry with substantial experience in the regulation of compensation arrangements, provides valuable insights for the regulation of executive pay. Based on the experience from professional sports leagues, we develop implications for the corporate sector regarding the establishment and enforcement of executive pay regulation as well as the level, structure, and rigidity of such regulatory measures.Salary Caps, Executive Compensation, Corporate Governance, Financial Crisis, Financial Regulation

Liberalization and Regulation of the Swiss Letter Market

The paper analyzes the impact of different regulatory models on competition and welfare in the Swiss letter market. We conclude that the US system worksharing yields the best results.Regulation, Liberalization, Universal Service, Worksharing

Asymmetric contests with liquidity constraints

We consider two bidders with asymmetric valuations competing to win an exogenous prize. Capital markets are imperfect, such that the contestants possibly face a liquidity constraint. We show that aggregate investments are lower if at least one bidder has a liquidity constraint, even if the low-valuation bidder possibly increases his/her investments. Furthermore, the effect of the high-valuation bidder's liquidity constraint on competitive balance is ambiguous. However, if the low-valuation bidder is constrained, greater wealth unambiguously increases competitive balance. Surprisingly, if the low-valuation bidder has a constraint, a tighter constraint can increase his/her profi