The Economics Analysis Of The Professional Sports League

The establishment of professional sports leagues is the primary condition for the development and financial stability in all group professional sports. When conflicts between the league and participating clubs occur, the league is prone to its own interest and monopoly. This kind of league, just like a cartel, is able to fix the price,quantity,quality,service and innovation to maximize league's profits. In the past century, it obtained limited antitrust dispensation and became the main governance mode in professional sports around the world. Why the league could achieve such a strong monopoly position and stability, has caused widely concern among researchers. Nowadays, researches on professional sports leagues are already abundant. But academic and empirical analysis, which integrate the production and organizing of professional sports and different governance mode for league into a analytical framework, is still scant. Hence, this paper is based on the proposition that the consumers prefer the uncertain outcome of matches. From the aspect that professional sports production has a request for clubs'competitive balance, this paper explores the basic rules of professional sport production and the mechanism of professional sports organization, and brings professional sports clubs and leagues into production organization system to grasp the ordinary rules of professional sports production and organization systematically, holistically and dynamically. This can provide a suitable thinking aspect for Chinese professional sports, which is still wandering in the corner, and also provide validating platform for economic theories, or on the other hand, enrich existing economic theories as well.So, this dissertation relies on the method of history and comparative institutional analysis, makes comparative analysis on American and European professional sports leagues which have the same origin, same performance, but different history of evolvement and different market structures. The research points out that, any effective league governance model is concerned closely with its location, capital, social and cultural background, this enables the possibility of multi-model governance for the leagues; every league governance model has its inside characteristic, that means, if people only abstract some elements from an optimal model and combine them with another optimized model, the coherence of the existing model may be damaged and the performance may also be decreased. As a result of it, we should consider exogenous conditions in imitation and abstraction, constitute league governance behaviors which suit those exogenous conditions, thus, we can create an optimal governance model.Second, this dissertation attempts to explain the rules and essence of professional sports production and leagues from the aspect of corporation theories. A league is born to be a community with cooperation. On the playground, clubs compete with each other, they play zero-sum games in which one team's success is based on the others'failures; however, when they leave the playground, the success of one club relies on the success of other clubs in the league, as well as the league, as an authority, has its own success and stability. Co-operative production becomes the aim and approach of the clubs'competition, while the consumers'favor to matches of uncertainty, the multi-dimensional bilateral market form and the natural monopoly of professional sports, make professional sports league more stable than ordinary cartel organization. However, this does not mean that professional sports leagues are always stable. It also faces problems such as the betrayal of clubs in the league. Professional sports leagues usually coordinate the members'behavior and punish cheaters, as well as betrayers, through total marketing, ration and average share of the market.Third, adopt Two-Club Theoretical Model to explore the nature of the league system arrangement from the perspective of the competitive balance. The results show that broadcast revenue share, home ground franchise, and promotion and demotion system can effectively promote the league competitive balance. Reserve clause, home ground ticket revenue share, and revenue share pool will not affect the league competitive balance. However, the implementation of those systems can effectively maintain the financial security for small clubs or clubs with poor financial base, therefore they have the rationality of existence in the development of professional sports. Finally, this dissertation takes National Basketball Association (NBA) and Chinese Professional Sports as cases, examines its theoretic views from empirical aspect.