Sports Leagues and Parity When League Parity Generates Fan Enthusiasm

This article demonstrates theoretically that, given a casual relationship exists from league parity to fan interest, as large-market teams myopically outbid small-market teams for talent there is potential for league parity to be underprovided. In this model, league parity is treated as a public good. With this characterization, this article arrives at the familiar economic result that public goods tend to be underprovided. This article does not discuss the impact of declining league parity intertemporally. Intuition suggests this decline could hamper interest in the league sport and even lead to a smaller fan base. The results suggest that if league parity is an important determinant of fan interest, a league lump-sum payment (transfer) and tax (subsidy) system may result in higher league profits. The article does add as a caveat that the authors are in no way justifying the revenue sharing plan adopted by Major League Baseball or any other league.