Why I Oppose Revenue Sharing

The Sports Economist links to some evidence on how owners use additional funds from new stadiums and naming rights.

Economic reasoning thus does not imply that increases in ballpark revenue will be invested in player talent. Better seats, improved sightlines, and general ambience could be complimentary with player talent, but there is no systematic evidence of this effect. Further, as Hakes and Clapp show, the “honeymoon effect” on attendance is of limited duration. The sale of naming rights is more clear-cut. This is a pure cash windfall, and should have no impact on the marginal returns to talent. Depken’s work confirms that it doesn’t – owners simply pocket the cash.

There is a case to be made for investment in new stadiums, but not the one made by Selig. I started with a question, and I’ll end with one for you to consider: Who does Selig think he’s fooling?

As any economist will tell you, the incentives are not right for owners to use additional revenue to help competitive balance.

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