Sports Economics
A Summary
In the article, “The Economics Of Professional Football: The Football Club As A Utility Maximiser”, Peter J. Sloane (1971) identifies a lack of a tenable theoretical framework when analysing the economic characteristics of the football industry, and endeavours to provide such framework.
It is pointed out by Sloane that the product of football competitions (i.e. football matches) necessarily is derived from more than one football club. Due to this characteristic Sloane deduces that clubs in football leagues are mutual interdependent so that a club’s survivability is dependent on the other league club’s success. A club’s reliance on other clubs is also to be supported in the financial arrangement of the Football League (e.g. transfer fees, shared gate receipts and equal distribution of income from the Football Association and the Football League).
The distinct characteristic of interdependency between the league clubs, gives rise to the pursuit of multiple goals. On the one hand, Sloane argues, clubs strive to finish the season better off than its opponents. On the other hand a club has financial incentives to assign a certain amount of attention to the on-going well-being of the other clubs. These greatly conflicting objectives go under the name: The Paradox of Competition. Sloane disarms any questioning on the legitimacy of a cross-subsidisation policy in the case of football regulations by arguing that the need for maximizing uncertainty of outcome justifies such policy.
According to Sloane the field of British professional football cannot be entirely understood by drawing upon the analogy and economic prescriptions of a normal business enterprise. In the case of professional football he suggests that the objective of utility maximisation is more capable of predicting behaviour than that of the profit maximisation objective usually connected with business activities. Profit maximisation in football is rejected since Sloane reasons that a majority
In the article, “The Economics Of Professional Football: The Football Club As A Utility Maximiser”, Peter J. Sloane (1971) identifies a lack of a tenable theoretical framework when analysing the economic characteristics of the football industry, and endeavours to provide such framework.
It is pointed out by Sloane that the product of football competitions (i.e. football matches) necessarily is derived from more than one football club. Due to this characteristic Sloane deduces that clubs in football leagues are mutual interdependent so that a club’s survivability is dependent on the other league club’s success. A club’s reliance on other clubs is also to be supported in the financial arrangement of the Football League (e.g. transfer fees, shared gate receipts and equal distribution of income from the Football Association and the Football League).
The distinct characteristic of interdependency between the league clubs, gives rise to the pursuit of multiple goals. On the one hand, Sloane argues, clubs strive to finish the season better off than its opponents. On the other hand a club has financial incentives to assign a certain amount of attention to the on-going well-being of the other clubs. These greatly conflicting objectives go under the name: The Paradox of Competition. Sloane disarms any questioning on the legitimacy of a cross-subsidisation policy in the case of football regulations by arguing that the need for maximizing uncertainty of outcome justifies such policy.
According to Sloane the field of British professional football cannot be entirely understood by drawing upon the analogy and economic prescriptions of a normal business enterprise. In the case of professional football he suggests that the objective of utility maximisation is more capable of predicting behaviour than that of the profit maximisation objective usually connected with business activities. Profit maximisation in football is rejected since Sloane reasons that a majority