TY - UNPB

T1 - Fundamentals and Optimal Institutions

T2 - The case of US sports leagues

AU - Gonzalez-Eiras, Martin

AU - Harmon, Nikolaj Arpe

AU - Rossi, Martín

PY - 2016

Y1 - 2016

N2 - To shed light on the relation between fundamentals and adopted institutions we examine institutional choice across the ``Big Four'' US sports leagues. Despite having very similar business models and facing the same economic and legal environment, these leagues exhibit large differences in their use of regulatory institutions such as revenue sharing, salary caps or luxury taxes. We show, theoretically and empirically, that these large differences in adopted institutions can be rationalized as optimal responses to differences in the fundamental characteristics of the sports being played. This provides a cautionary tail against trying to transplant succesful institutions across different economic settings.

AB - To shed light on the relation between fundamentals and adopted institutions we examine institutional choice across the ``Big Four'' US sports leagues. Despite having very similar business models and facing the same economic and legal environment, these leagues exhibit large differences in their use of regulatory institutions such as revenue sharing, salary caps or luxury taxes. We show, theoretically and empirically, that these large differences in adopted institutions can be rationalized as optimal responses to differences in the fundamental characteristics of the sports being played. This provides a cautionary tail against trying to transplant succesful institutions across different economic settings.

M3 - Working paper

T3 - RePEc (Research Papers in Economics)

BT - Fundamentals and Optimal Institutions

ER -