2_League Model Questions and Competitive Balance Flashcards
How do teams’ talent levels compare if they have the same objectives and market conditions?
If both teams have identical market factors and follow the same strategy, they will acquire the same levels of talent.
How does a win-maximizing team compare to a profit-maximizing team in terms of talent acquisition?
A win-maximizing team will acquire more talent than a profit-maximizing team. If a profit-maximizing team switches to win-maximization, it will invest more in talent.
Do win-maximizing teams charge more for tickets than profit-maximizing teams?
Yes, win maximizers charge higher ticket prices because they invest in more talent, increasing demand and perceived value.
How do market size and cost structure impact talent acquisition?
If a large-market team has higher market factors and equal cost structures, it acquires more talent. If teams have equal market factors and lower costs, the team with lower costs acquires more talent.
Under what conditions is competitive balance better?
Competitive balance improves when the large-market team is a profit maximizer and the small-market team is a win maximizer.
What factors increase sport popularity?
Greater total talent in the league leads to higher ticket sales, increased fan engagement, and more popularity, especially in win-maximizing leagues.
How does lump-sum revenue sharing impact competitive balance?
Large-market teams transfer revenue to small-market teams, reducing disparity but not affecting the marginal cost of talent.
What is the impact of a hard salary cap?
At a threshold, the marginal cost of talent becomes prohibitive, limiting spending and enforcing financial parity.
How does a luxury tax without redistribution impact teams?
High-spending teams pay a tax above the threshold, increasing their cost of talent but without financial aid for smaller teams.
What is the impact of redistributing a luxury tax?
The tax collected from high-spending teams is redistributed to lower-spending teams, promoting financial balance.
How does a combined luxury tax and poverty subsidy impact competition?
A tax is imposed on high-spending teams while low-spending teams receive subsidies, encouraging balanced talent investment.
How do competitor count and prize structure affect competition?
More competitors increase engagement. A single grand prize creates strong incentives but may discourage weaker participants.
How does playoff expansion impact competitive balance?
Expansion increases revenue and participation but may dilute competitive intensity.
How do literature reviews differ from other types of economic writing?
Literature reviews synthesize existing research rather than presenting new findings.
What is the Invariance Proposition?
Based on Coase’s Theorem, it states that efficient allocation of talent occurs if player rights are clearly defined, transaction costs are low, and financial exchanges are allowed.
How does the invariance proposition apply to player acquisition?
Whether players enter via a draft or free agency, talent allocation will still be efficient.
What is the Sherman Act, and how does it relate to sports?
Prohibits monopolies and trade restraints. Selectively enforced in sports.
How have leagues limited competition?
Leagues implement revenue-sharing agreements, salary caps, luxury taxes, and exclusive broadcasting rights.
How did MLB gain antitrust exemption?
In 1922, the Supreme Court ruled that baseball was not ‘interstate commerce,’ allowing MLB to operate outside antitrust laws.
How does talent acquisition work with equal market size and revenue structures?
If two teams have equal market sizes and equal revenue parameters, and share the same objectives, they will acquire the same talent.
How do win-maximizing and profit-maximizing teams differ in talent acquisition?
Win maximizers acquire more talent while profit maximizers focus on revenue optimization rather than talent spending.
How does ticket pricing compare between win and profit-maximizing teams?
Win maximizers charge higher ticket prices while profit maximizers set prices to optimize revenue.
How do market size and revenue affect talent acquisition?
Larger-market teams acquire more talent, and teams with lower costs can spend more efficiently on talent.
When is competitive balance better?
More equal when large-market teams maximize profit, and small-market teams maximize wins.
