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Cover of: The Sugar Daddy Game: How Wealthy Investors Change Competition in Professional Team Sports
Martin Grossmann, Markus Lang

The Sugar Daddy Game: How Wealthy Investors Change Competition in Professional Team Sports

Section: Articles
Volume 167 (2011) / Issue 4, pp. 557-577 (21)
Published 04.10.2018
DOI 10.1628/jite-2011-0002
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  • 10.1628/jite-2011-0002
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Summary
Professional sports leagues have witnessed the appearance of sugar daddies – people who invest enormous amounts of money in clubs and become their owners. This paper presents a contest model of a professional sports league that incorporates this phenomenon. We analyze how the appearance of a sugar daddy alters competitive balance and social welfare with respect to a league with purely profit-maximizing club owners. We further show that the welfare effect of revenue sharing in a sugar daddy league is ambiguous and depends on the degree of redistribution and on whether the sugar daddy invests in a small or a large club.