Relationship Between Player Value and Competitive Balance Under the Assumption of Oligopoly

Abstract

The evolution of competitive balance and its impact on demand is the focus in the field of sports economics. The results of previous studies examining the relationship between competitive balance (CB) and attendance, as well as the direction of the relationship between financial inequality and CB, are not clear. Through panel data of the top five European football leagues, we examine whether there is a causal relationship between the concentration of club wealth and CB. Using different CB measures and the player value concentration as a proxy for wealth concentration, we found that wealth concentration has an impact on competitive imbalance. A partial adjustment model was able to detect the causal relationship even though CB refers to a moment while the wealth concentration refers to a period. This study helps to understand why previous research has found conflicting results on the relationship between financial inequality and competitive balance.

Factors influencing competitive balance across European football top tier leagues

“…Increasement in Team Value Concentration in Top-5 and Log StDev Team Value in the League negatively affects the competitive balance, which is an expected outcome. The results concur withRappai and Ivett Fűrész (2022), who noted the relationship between talent concentration and increasing competitive imbalance. The positive effect of increasing the Local Currency Rate to Euro on competitive balance is also expected.…”

Talent concentration and competitive imbalance in European soccer

“…As long as we do not add any further controls, our regression analysis seems to confirm recent studies such as Rappai and Fűrész ( 45 ) and Gasparetto et al ( 44 ) that have shown statistically significant impact of talent concentration on the concentration of end-of-season league points—suggesting that leagues with a more unequal talent distribution are characterized by a lower level of competitive balance. However, since the significant impact of talent on points concentration is weaker for lower divisions, this effect disappears once we add division dummies to the estimations.…”

“…In contrast, while Scelles et al ( 43 ) include talent distribution in their theoretical framework, they do not directly test its impact. However, Gasparetto et al ( 44 ) and Rappai and Fűrész ( 45 ) test talent concentration in the same manner as our study, and their findings indicate a positive relationship between talent concentration and competitive imbalance, which contrasts with our main finding.…”

“…Gasparetto et al ( 44 ) and Rappai and Fűrész ( 45 ) have conducted studies closely related to ours, examining the factors influencing competitive balance in European soccer. In contrast, while Scelles et al ( 43 ) include talent distribution in their theoretical framework, they do not directly test its impact.…”

“…In contrast, the number of teams in the league, Elo rank, local currency to Euro rate, and Gini index have a positive effect. In a similar study, Rappai and Fűrész ( 45 ) examine the relationship between player value, talent, number of superstars, and sports performance regarding competitive balance in the top five European soccer leagues.…”