Sports Finance and Management

444  ◾  Sports Finance and Management

cap. For the small-market team, talent investment decreases and winning increases,

and therefore, prots increase.

Revenue Sharing

us far it has been assumed that teams keep all of their revenue, but in the case of

revenue sharing, a team’s prot is given by:

π α α

i i i i j j j i j i

R w z z R w z z z= −

( )

+

( )

−( ) ( , ) ( , )1

where α is the proportion of revenue that is shared.* Again, taking the derivative so

that teams invest until the marginal benet equals marginal cost indicate that the

following equation will hold:

( )1 1−

∂

∂

+

∂

∂

=α α

dR

dw

w

z

dR

dw

w

z

i

i

i

i

j

j

j

i

.

And, again, because this is true for both tea