Spectators are held to value close contests, so a league's revenue depends on competitive balance.
Stated in Rottenberg's 1956 paper and developed by Neale in 1964, it underpins the standard defence of drafts, salary caps and revenue sharing. Testing it has proved difficult and the results are mixed, which matters, because the policies it justifies are substantial restraints on a labour market.
In practice
- A league imposes a salary cap to protect a demand relationship it has not measured.
- A dominant team fills stadiums for a decade, which the hypothesis does not predict.
- Possible explanations
- The explanation is demand: if spectators value contests whose result is in doubt, a league's revenue depends on no club being able to dominate, which is the standard justification for drafts, caps and revenue sharing.
- In its favour
- The reasoning is clear, it underpins the competitive design of most professional leagues, and some studies do find attendance responding to closeness of the contest.
- Against it
- The empirical support is weak and inconsistent, with many studies finding attendance and viewing driven more by star quality, stakes and habit than by closeness, and dominant teams have repeatedly coincided with record revenue.
- Standing
- The empirical support is weak and inconsistent: many studies find attendance and viewing driven more by star quality, stakes and habit than by closeness, and dominant teams often draw best.
- Subject
- Sport & Performance
- Essay
- The best-measured contests there are