This article uses economic theory to examine the variables that affect the competitive balance in a professional sports league and the impact of revenue sharing. The generally accepted proposition that revenue sharing does not affect the competitive balance in a profi t-maximizing league has been challenged by many. It is shown that the competitive balance and the impact of revenue sharing not only depend on the relative size of the market of the clubs, but that they are also affected by the objectives of the club owners and the importance to spectators of absolute team quality and uncertainty of outcome. Furthermore, the clubs’ hiring strategies, including the talent supply conditions, turn out to be important elements affecting competitive balance and the impact of revenue sharing.
Marijke Taks and Stefan Késenne
This study measures the share of the sports sector in the regional economy of Flanders by means of expenditure related to active sports participation and spectator sport. In contrast with the more common cost-benefit approach, the perspective of this study is rather macroeconomic. A representative sample of 512 households was interviewed by means of a standardized questionnaire. Data on government expenditure were gathered from an analysis of budgets and bills. Private investments and the balance of trade statistics were estimated. All these expenditures, $4.3 billion U.S., constitute the Gross Regional Sport Product for Flanders. During the past 15 years, household expenditure in sport has increased, while government expenditure has stagnated. However, government intervention remains necessary for setting up the legal context, financing the construction and maintenance of a rich variety of sports facilities, and for lowering the price threshold for low-income families. This study has shown the importance of the sports sector for the Flemish economy, mainly through household expenditure.