The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports

ISU Working Paper No. 128

24 Pages Posted: 16 May 2010 Last revised: 3 Mar 2011

See all articles by Markus Lang

Markus Lang

University of Lausanne

Martin Grossmann

University of Zurich

Philipp Theiler

University of Zurich - Department of Business Administration (IBW)

Date Written: October 6, 2010

Abstract

Professional sports leagues have witnessed the appearance of so-called "sugar daddies" - people who invest enormous amounts of money into clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a sugar daddy alters competitive balance and social welfare compared to a league with purely profit-maximizing club owners. We further show that the welfare effect of revenue sharing in a sugar daddy league is ambiguous and depends on the degree of redistribution and on whether the sugar daddy invests in a small or large club.

Keywords: Competitive balance, contest model, social welfare, sports leagues, sugar daddy

JEL Classification: L83, L2, D43, C72

Suggested Citation

Lang, Markus and Grossmann, Martin and Theiler, Philipp, The Sugar Daddy's Game: How Wealthy Investors Change Competition in Professional Team Sports (October 6, 2010). ISU Working Paper No. 128, Available at SSRN: https://ssrn.com/abstract=1606043 or http://dx.doi.org/10.2139/ssrn.1606043

Markus Lang (Contact Author)

University of Lausanne ( email )

Quartier UNIL-Centre
Synathlon
Lausanne, 1015
Switzerland

Martin Grossmann

University of Zurich ( email )

Plattenstrasse 14
CH-8032 Zürich, 8032
Switzerland

Philipp Theiler

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

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