Egon Franck

TALENT AND/OR POPULARITY: WHAT DOES IT TAKE TO BE A SUPERSTAR?

We show that both talent and popularity significantly contribute to stars’ market values in German soccer. The talent-versus-popularity controversy on the sources of stardom goes back to Rosen (1981) and Adler (1985). All attempts to resolve the controversy empirically face the difficulty of accurately identifying talent. In professional sports, rank-order tournaments help in ascertaining talent. Analyzing a team production setting, we make use of a large number of performance indicators to estimate a player’s talent according to his contribution to the team’s winning chances.

Reconciling Rent-Seekers and Donators - The Governance Structure of Open Source

Software developed and producedin open source projects has become an importantcompetitor in the software industry. Since itcan be downloaded for free and no wages arepaid to developers, the open source endeavorseems to rest on voluntary contributions byhobbyists. In the discussion of this puzzle twobasic patterns of argumentation stand out. Inwhat we call rent-seeker approaches, emphasisis put on the fact that although no wages arepaid to contributors, other pay-offs may turntheir effort into a profitable investment. Inwhat we call donator approaches the point ismade that many people contribute to open sourceprojects without expecting to ever receive anyindividual rewards.We argue that the basic institutionalinnovation in open source has been the craftingof a governance structure, which enablesrent-seeking without crowding out donations.The focus of the presented analysis lies on thespecific institutional mechanisms, by which theopen source governance structure achieves toreconcile the interests of rent-seekers anddonators.

The effect of wage dispersion on team outcome and the way team outcome is produced

The impact of intra-team pay dispersion on team productivity is a highly discussed issue. On the one hand, wage differentials provide incentives for higher employee effort. On the other hand, pay inequality may reduce team cohesiveness and increase feelings of relative deprivation leading to lower performance. Analysing nonlinear effects of wage dispersion in professional soccer, we find empirical evidence that team performance is strongest when there is either very high or very low wage inequality. Medium levels produce the weakest team performance. In addition, we show that the pay structure affects the teams playing style even after controlling for team and coach heterogeneity. We discuss the theoretical and managerial implications as well as the limits of generalization.

Financial Fair Play in European Club Football - What is it All About?

The new UEFA Club Licensing and Financial Fair Play Regulations have encountered stiff criticism. The concerns are that the new regulations may harm football in three different ways: By forgoing the potential benefits from substantial injections of external money into payrolls, by restricting competition in the player market without at the same time achieving benefits from more balanced competition, and by creating some sort of barrier to entry which could freeze the current hierarchy of clubs. It is the purpose of this paper to take these concerns as a starting point for discussing the likely effects of the new regulations. As a by-product it will become obvious why and in which points the concerns are unfounded.

The Role of Patriotism in Explaining the TV Audience of National Team Games—Evidence From Four International Tournaments

In the literature addressing the determinants of TV audiences in sports, both the absolute and relative playing strength of the opponents play a prominent role. Regarding national team competitions, however, this study conjectures that patriotism matters as well. Analyzing the Swiss TV audience at 2 World Cups and 2 European Football Championships, this study finds strong evidence that TV ratings are highly affected by the sizes of the groups of foreign residents affiliated with the teams playing on the field.

Mechanisms of Superstar Formation in German Soccer: Empirical Evidence

Abstract Based on the competing theories of superstar formation proposed by Rosen (1981) and Adler (1985) it is controversial if first hand observable talent or other factors like past consumption and popularity influence stardom. This article investigates the emergence of superstars in German soccer. We use data on market values and individual player performance and publicity data to differentiate between Rosens and Adlers theory of superstar formation. Running quantile regressions we find evidence that Adlers theory applies to German soccer stars. Therefore, not only investments in physical talent but also the cultivation of popularity is an adequate strategy for becoming a superstar.

Sentimental Preferences and the Organizational Regime of Betting Markets

We analyze the price impact of sentimental bettor preferences within a bookmaker betting market. Our model demonstrates that, under reasonable assumptions about the nature of demand in a market with strong competition, the bookmaker will offer lower prices for bets with comparatively stronger demand. Using a sample of more than 16,000 English soccer matches we find evidence that more favorable odds are extended to bets on more popular clubs and that this effect is amplified on weekends when sentimental bettors face lower opportunity costs to wager. Our findings help to explain why the market for sports gambling operates as a hybrid structure with bookmakers able to attract a considerable share of the betting volume although identical contracts are traded on exchange markets at lower costs; the organizational design of a quote-driven market enables the dealer to take advantage of sentimental bettor preferences.

The Effect from National Diversity on Team Production - Empirical Evidence from the Sports Industry

We analyze the effect of national diversity on sports team performance. Due to language barriers, we expect the team’s productivity to decrease with the number of nationalities, but that the introduction of further nations and further aspects of different cultures might lead to additional skills within the team. We test our hypothesis on a seasonal individual team basis. We do not find that national diversity among team members significantly influences a team’s performance. However, we find that the influence of national diversity on team performance depends on the nature of the underlying task.

Salary Cap Regulation in Professional Team Sports

This paper analyzes the effects of a percentage-of-revenue salary cap in a team sports league with win-maximizing clubs and flexible talent supply. It shows that a percentage-of-revenue cap produces a more balanced league and decreases aggregate salary payments. Taking into account the idiosyncrasies of European football, our paper further highlights the potential conflicts between the league and society. From the perspective of a league governing body, a percentage-of-revenue cap always enhances financial stability of win-maximizing clubs. A social planner, however, will not permit the introduction of such a cap if fans and players unduly suffer. This paper shows under which conditions the social planner accepts (rejects) a salary cap proposed by the league regulator.

Problemstruktur, Eskalationsvoraussetzungen und eskalationsfördernde Bedingungen sogenannter Rattenrennen

SummaryThe paper analyzes the economic structure of rat races, which either emerge in signaling (as a means of handling informational problems in labor markets) or in genuine tournaments. The unifying element of such contests is a rank-order reward structure. The pervasive phenomenon that contestants compete with too much effort or wasteful investments, cannot be explained in a satisfying manner if fully rational behavior is assumed. Therefore, systematic distortions of contestants’ cost benefit rationales and their causes are an important issue of this paper which closes by addressing some institutional solutions to curb too much effort or wasteful investments in rat races.