"Institutional Arrangements And Sporting Leagues" Essay

3886 words - 16 pages

I. IntroductionThis paper examines the role played by the governing bodies of various sports codes in regulating the institutional arrangements of their respective sports. Institutional arrangements in sport include salary caps, player drafts, geographic resident requirements and restrictions on the number of foreign nationals allowed to play. These measures are carried out to preserve the 'competitive balance' of the competition and to safeguard opportunities for local players. An exciting and closely contested competition is an essential feature of a professional sporting league (Hadley, Ciecka, Krautmann, 2005). Creating and maintaining the competitive balance of any sporting league is vital for the credibility of the competition. When a competition is dominated by one or two teams match attendance is likely to stagnate (Fort & Maxcy, 2003). This is a result of the fact that sports fans like to see their team win, however they also like a close competition. In the United States the issue of institutional arrangements is rife as many sporting leagues face the prospect of supporters becoming disenchanted with their sport due to a lack of competitive balance (Witting, 2003).In Australia, two sporting leagues the National Rugby League (NRL) and Australian Football League (AFL) have implemented various labour market restrictions based on the understanding they improve competitive balance. This paper explores the nature of the institutional arrangements in both these sporting leagues and their effectiveness. The focus then shifts to the issue that institutional arrangements act as a restraint on trade. A graphical representation demonstrates that professional team sports have developed a series of monopsonistic labour market rules that have severely limited the economic rights and income earning potential of players. Finally, most players and supporters reinforce (at least in a passive manner) the view that sport governing bodies should put into effect some sort of institutional arrangements. However, in the United Kingdom the English Premier League (EPL) does not have institutional arrangements in place and clubs with the greatest finances consistently dominate both the player market and the final standings. This paper evidences that although institutional arrangements are acknowledged as a means to improve the competitive balance of a sporting league, this view may not be applicable in every circumstance.II. SPORTING LEAGUES AND COMPETITIVE BALANCEEvery sport and sports league has had to confront the fundamental issue of relative strengths among competitors. There has not been a uniform, one size fits all approach or set of rules to resolve this problem. Many sport governing bodies have introduced institutional arrangements to ensure the 'competitive balance' of their league is maintained. The concept of 'competitive balance 'comprises an extensive amount of literature in the economics of professional team sports. Rottenberg (1956) and Neale...

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