League-Revenue Sharing and Competitive Balance

This paper contributes to the debate on revenue sharing by considering the effect of an increase in shared league-revenue on competitive balance in a league comprised of profit-maximising clubs compared with a league comprised of win-maximising clubs. Taking into account the effect of the relative (but not absolute) quality of the teams on the clubs' revenues, it is shown that under win maximisation increases in shared league-revenue tend to increase competitive balance and raise player wages. This is different from the case of profit maximisation, where increases in shared league-revenue have no impact on either competitive balance or player wages.