Increasing financial disparity and spiralling wages in European football have triggered a debate about the introduction of salary caps. This paper provides a theoretical model of a team sports leagues and studies the welfare effect of salary caps. It shows that salary caps will increase...

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...