Does a Win Bonus Help to Increase Profits or Wins on Professional Sports Teams?
) International Journal of Sport Finance, 2007, vol. 2, issue 3, pages 142-148 Abstract: In a sports league, team owners can expect to increase player performance, and the team’s winning percentage or profits, by providing a win bonus on top of the players’ fixed salary level. In some clubs, the guaranteed player salary is relatively low and the premium, in case of a winning game, relatively high, whereas in other clubs, hardly any win bonus is paid. In this theoretical paper, we investigate what the impact of a win bonus is on the winning percentage, the competitive balance, the owner profits, and the overall quality in a professional sports league. The model we start from is an extension of the well-known Quirk and Fort (1992) two-team model and we introduce a premium system consisting of a win bonus that is paid on top of a fixed salary. Assuming that players are motivated to increase effort if their salary depends on the winning percentage, we derive the Nash-Cournot equilibrium un
