Game Theoretic Analysis of Basic Team Sports Leagues

The article proposes a new “strategic market game” (SMG) approach to modeling strategic interactions between clubs in professional team sports leagues, and generalizes a basic framework used in previous literature (two clubs, fixed talent supply and club revenues that depend only on relative team qualities), to allow variable talent supply and club revenues that depend on absolute (and relative) team qualities. The new approach incorporates club talent market power (duopsony), overlooked by existing approaches; in both the basic and the more general framework, Nash equilibrium competitive balance is analyzed, with and without revenue sharing and with comparisons to existing analyses.