Competition and talent have increased exponentially in sports due to many factors such as access to advanced technology, coaching, financial resources, and even performance enhancing drugs. Therefore, professionals who have overcome the high barriers to enter the sports market represent a small portion of the potential pool of athletes trying to enter the sports industry. During the Covid-19 pandemic, sports have been stopped but this does not mean that athletes should stop training because that situation entails a great opportunity cost since others can catch up and enter the industry to take away a professional athlete’s spot. Players like Cristiano Ronaldo or Lionel Messi are still in great shape since soccer matches have started again since they continued to work out and practice by themselves during quarantine.
Most economists agree with the idea that competition is good for the economy because it promotes a good price and quality product to sell from different sellers. In soccer, we call this idea competitive balance, which describes the competition that exists among teams in the league. The soccer market functions in a similar manner with a few tweaks. One of the main factors that affects the willingness of fans to come and watch sports games and pay for tickets is the UOH (Uncertainty of Outcome Hypothesis). According to this hypothesis, outcome uncertainty drives up consumer demand and more people to watch games at home and in the stadium. According to basic supply and demand curves, an increase in demand would help leagues reach their ultimate goal, maximize revenue. There are a few exceptions when competitive imbalance is better for the league such as the Bundesliga because teams such as Bayern and Dortmund have great marketing followings behind them that fan attendance at games is still high even though the outcome is quite predictable. In addition, perfect competitive balance in the league is not ideal because this can bore fans as there are no star players or teams. To achieve optimal competitive balance (to help maximize revenue), it is important to establish a relationship between rational and behavioral economics, which we will explore in the next blog.