Competition Among National Football Leagues. Does It Exist? Should We Regulate?
| Date | 01 February 2017 |
| DOI | http://doi.org/10.1111/sjpe.12101 |
| Author | Yvon Rocaboy |
| Published date | 01 February 2017 |
COMPETITION AMONG NATIONAL
FOOTBALL LEAGUES. DOES IT EXIST?
SHOULD WE REGULATE?
Yvon Rocaboy*
ABSTRACT
It is often supposed that the stakeholders of a national football league draw
more satisfaction from their sport if the league is balanced, that is, if a large
number of clubs have a reasonable chance of winning. This is the so-called Com-
petitive balance hypothesis. This hypothesis can be challenged, however, in the
context of international competition like the European champions league. It
could be that the utility of national leagues’ stakeholders would be higher if the
probability of victory for their nation’s club at the international level were
higher. If this were the case, a league’s governing body intending to maximize
the quality of the national league by making use of redistributive schemes would
face a trade-off between national competitive balance and international perfor-
mance of the national representative club. We propose a simple microeconomic
framework to model this trade-off. If a non-cooperative game exists among the
national league governing bodies, whether it is a Nash or a Stackelberg one, this
game would result in inefficient redistributive policies. We find ‘soft’ empirical
evidence of such a competition among the big 5 football leagues in Europe. This
result supports the idea of the creation of an international regulatory body. We
derive the conditions under which the international regulatory body should ensure
that the leagues’ governing bodies implement redistributive schemes guaranteeing
the respect of the national competitive balance. We also emphasize the risk of
experiencing a drop in the quality of leagues if one of them becomes too big rel-
atively to the others, what we call the tragedy of the wealthy.
II
NTRODUCTION
According to Arnaud Rouger, Sport director at the LFP (Professional Foot-
ball League, France) : ‘Every league faces a pressure to manage its champi-
onship with the recognition that some of the clubs will participate in
international competition. This is a delicate situation because the league has
to preserve its national championship while still trying to satisfy the clubs
which want to qualify for these international competitions. Thus, the league
*
Centre de Recherche en Economieet Management (CREM-CNRS) and University of Rennes1
Scottish Journal of Political Economy, DOI: 10.1111/sjpe.12101, Vol. 64, No. 1, February 2017
©2015 Scottish Economic Society.
88
faces a political decision regarding income redistribution.
1
The league may
decide to unbalance the redistribution and favour the clubs at the top of the
league with the intention of helping them in international competition, or to
adopt a more equal redistribution, which might impair the competitiveness of
its clubs internationally. If it chooses the first alternative, it runs the risk of
harming its primary product, unbalancing the national competition and
undermining public interest’.
2
This statement is a perfect summary of the thorny issue facing the govern-
ing bodies of the European football leagues. The inter-league competition is
conducted by the use of within-league revenue sharing schemes.
3
For instance,
a national league could improve the performance of its representative club at
the international level by redistributing revenues from broadcast contracts or
ticket sales in ways that would favour the emergence of a strong domestic
champion. By doing so, it makes the representative clubs of the rival leagues
relatively weaker in the international competition which could trigger a reac-
tion from their governing bodies. This is the channel through which inter-lea-
gue competition may occur.
Surprisingly, this issue has not yet received much attention in the eco-
nomic literature. Some papers study the effect of redistributive schemes on
the teams’ demand for talent and on the league’s competitive balance, but
only in the case of a single league (for instance Kesenne and Szymanski,
2004; Dietl et al., 2011; Peeters, 2012). Only a few authors propose a
framework where some domestic clubs can also play in an international
championship. This is for instance what Hoehn and Szymanski (1999) do,
but they do not focus on the interactions among leagues resulting from the
existence of the international competition. In Palomino and Sakovics
(2004), the leagues do not interact with each other via an international
championship but through the inter-league competition for talent. The
national leagues are in competition to increase their domestic stock of tal-
ents and the authors raise the issue of which kind of Club reward scheme
may help achieve that goal. None of the leagues’ governing bodies have a
preference for the quality of the international championship. In fact, rela-
tive to these papers, our paper both raises different issues and proposes a
different framework.
In this paper, we provide a very simple game theoretical framework to
study the properties of an inter-league competition through revenue sharing.
We first consider the case of two leagues, each of which has two contradic-
tory aims: to have a balanced domestic championship and to have their rep-
resentative club in the international competition performs strongly. These
1
This issue is also emphasized by Bourg (2004, p. 12): ‘An optimal distribution of broad-
cast rights fees that encourages balance among teams in the pursuit of a national champi-
onship would have implications for the ability of the national champions as they move on
into competition for European championships’.
2
Quoted by Ducrey et al. (2003).
3
see Fort and Quirk (1995) or Vrooman (2007, 2013) for a discussion of these redistribu-
tive schemes.
COMPETITION AMONG NATIONAL FOOTBALL LEAGUES 89
Scottish Journal of Political Economy
©2015 Scottish Economic Society
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