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Int. J. Financial Stud. 2018, 6(3), 71; https://doi.org/10.3390/ijfs6030071

Revenue Sharing in Major League Baseball: The Moments That Meant so Much

1
Department of Economics, University of Lethbridge, Lethbridge, AB T1K3M4, Canada
2
Department of Economics, Simon Fraser University, Burnaby, BC V5A1S6, Canada
*
Author to whom correspondence should be addressed.
Received: 31 May 2018 / Revised: 27 July 2018 / Accepted: 2 August 2018 / Published: 6 August 2018
(This article belongs to the Special Issue Sports Finance 2018)
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Abstract

Revenue sharing is a common league policy in professional sports leagues. Several motivations for revenue sharing have been explored in the literature, including supporting small market teams, affecting league parity, suppressing player salaries, and improving team profitability. We investigate a different motivation. Risk-averse team owners, through their commissioner, are able to increase their utility by using revenue sharing to affect higher order moments of the revenue distribution. In particular, it may reduce the variance and kurtosis, as well as affecting the skewness of the league distribution of team local revenues. We first determine the extent to which revenue sharing affects these moments in theory, then we quantify the effects on utility for Major League Baseball over the period 2002–2013. Our results suggest that revenue sharing produced significant utility gains at little cost, which enhanced the positive effects noted by other studies. View Full-Text
Keywords: revenue sharing; welfare; moments; risk aversion revenue sharing; welfare; moments; risk aversion
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).
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Rockerbie, D.; Easton, S. Revenue Sharing in Major League Baseball: The Moments That Meant so Much. Int. J. Financial Stud. 2018, 6, 71.

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