Rivalries, Talent Acquisition and Revenue Sharing

We define two professional sports clubs as rivals if their consistent talent belief is positive. That is, they engage in some degree of talent matching. We then construct a simple two-team Stackelberg model with revenue sharing based on profit maximizing clubs. Clubs will always engage in talent matching to some degree as long as there is no constraint on acquiring talent (salary caps). The more fans value the closeness of contests with the rival, the more clubs will engage in talent matching. Revenue sharing is shown to reduce the incidence of talent matching, and thus rivalries, by reducing the sensitivity of revenues to the closeness of the contests. It may be possible to use revenue sharing to promote rivalries and parity at the same time. Free agency and league expansion are shown to reduce the incidence of rivalries