International rewards and budget concentration in domestic sports leagues

Abstract

This paper examines the interdependence of international success and budget concentration for sports clubs. More specifically, we apply the notion of the Herfindahl–Hirschman index to examine the effect of international rewards on distortion of budget concentration and financial opportunities for sports clubs. We establish a relationship between the size of rewards and its impact on the index, thus deriving conditions under which budget concentration increases or decreases. Our results yield interesting policy implications for the regulation of prize schemes in international competitions.