SALARY CAP REGULATION IN PROFESSIONAL TEAM SPORTS |
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| Authors: | HELMUT M DIETL EGON FRANCK MARKUS LANG ALEXANDER RATHKE |
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| Institution: | 1. Dietl: Professor, Department of Business Administration, University of Zurich, CH‐8032 Zurich, Switzerland. Phone +41 44 634 53 11, Fax +41 44 634 53 01, E‐mail helmut.dietl@business.uzh.ch;2. Franck: Professor, Department of Business Administration, University of Zurich, CH‐8032 Zurich, Switzerland. Phone +41 44 634 29 27, Fax +41 44 634 43 48, E‐mail egon.franck@business.uzh.ch;3. Lang: Senior Research Associate, Department of Business Administration, University of Zurich, CH‐8032 Zurich, Switzerland. Phone +41 44 634 53 11, Fax +41 44 634 53 01, E‐mail markus.lang@business.uzh.ch |
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| Abstract: | This paper analyzes the effects of a percentage‐of‐revenue salary cap in a team sports league with win‐maximizing clubs and flexible talent supply. It shows that a percentage‐of‐revenue cap produces a more balanced league and decreases aggregate salary payments. Taking into account the idiosyncrasies of European football, our paper further highlights the potential conflicts between the league and society. From the perspective of a league governing body, a percentage‐of‐revenue cap always enhances financial stability of win‐maximizing clubs. A social planner, however, will not permit the introduction of such a cap if fans and players unduly suffer. This paper shows under which conditions the social planner accepts (rejects) a salary cap proposed by the league regulator. (JEL D02, D60, L83) |
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