Sports market outcomes: leagues, team location, expansion, and negotiations

Leagues enable owners to pursue economic goals and objectives that they cannot pursue as successfully acting alone, such as setting a season schedule, organizing championships, and implementing rule changes.

Single-entity cooperation defines the actions that owners must take to make league play happen in the first place.
(1) setting the schedule: Balanced scheduling, home and away, is essential to the success of the league. Leagues need to act in their single-entity capacity to include all teams in the schedule. To generate widespread fan interest and league growth, stronger teams must play weaker teams as well as other strong teams in order to cultivate broad fan interest.

Another important element is the season length.

(2) Setting the rules: Rules are changed to attract fans.

(3) Cooperation and championships: Determining a champion is very economically valuable. Adding playoffs does 2 things: it extends the season and fan interest for a few teams; it reduces the returns to buying talent.

Joint venture cooperation: The economics of league behavior
Once owners act together in pro leagues to set the stage for competition on the field, they may also act together to raise profits for member owners. All cooperative actions that do not make play happen are called joint ventures. In a joint venture, all owners in the league surrender part of their autonomy to allow the league to act on their behalf. Joint ventures are cooperative acts aimed at increasing profits relative to acting individually. 

(1) The definition and protection of individual owner territory. The league is allowed through franchise agreements (a contract between the league and an owner that clearly specifies what it means to own a pro sports team) to define a territory and ensure that no other members locate within that territory.

This managed absence of substitutes allows individual teams to maximize profits as monopolies in their sport in their territory.

(2) Quantity restrictions: 2 indicators
a. rival leagues do form occasionally, indicating that the previous league size was too small in the eyes of the fans of the rival league
b. every time a league announces that it plans to expand, a long line of candidate-owners forms in the hope of becoming the newest addition to a league.
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