Relationship Between Player Value and Competitive Balance Under the Assumption of Oligopoly

The evolution of competitive balance and its impact on demand is the focus in the field of sports economics. The results of previous studies examining the relationship between competitive balance (CB) and attendance, as well as the direction of the relationship between financial inequality and CB, are not clear. Through panel data of the top five European football leagues, we examine whether there is a causal relationship between the concentration of club wealth and CB. Using different CB measures and the player value concentration as a proxy for wealth concentration, we found that wealth concentration has an impact on competitive imbalance. A partial adjustment model was able to detect the causal relationship even though CB refers to a moment while the wealth concentration refers to a period. This study helps to understand why previous research has found conflicting results on the relationship between financial inequality and competitive balance.