Exam Paper and Answer Book with

Instructions for Remote Assessment

Candidates
Please read this document fully and carefully. It contains important information on how to
complete your exam and how to submit it correctly. Contact details are provided if you have
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The exam questions start here.

Student and Assessment Details

Student ID Number: (replace this text with your student number)

Department: Department of Management

Module Title: Sport Economics and the Design of Competitions
Module Code: BUMN001H7
Credit Value: 15 Credits

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Instructions for candidates

1. Student ID Number
Please complete page 1 of this document with your student ID number. Read all the
following instructions carefully before starting the assessment.
2. Assessment Format
This is an open book assessment which can be submitted at any time within the permitted
48 hours assessment window. The examiners will be expecting answers similar to those
produced under examination conditions, not long essays. Full references and
bibliographies are not therefore expected, unless specified in the assessment instructions.
Please use in-text citations to indicate source material where appropriate.
3. Academic Integrity Statement for Remote Assessments

By submitting this assessment you confirm that this is your original work and that you
have not enlisted the help of others at any point. You understand that this assessment is
undertaken without invigilation, and that you have not communicated with anyone
concerning this assessment before the deadline for submission. Deliberate academic
misconduct is taken very seriously by the Department and may lead to severe penalties.
Please refer to our Assessment Offence policy for further information.

4. Word Limit
The word limit is 1000 words per question.
5. Assessment Window
This assessment was released at 10 AM on Wednesday, 15 December 2021. The window
for completion of this assessment is 48 hours. The assessment is expected to take 3-4
hours (or more if identified in a Study Support Plan).
6. Deadline
The deadline for submission of this assessment is 10 AM on Friday, 17 December 2021.

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Assessment Questions
Assessment Instructions

 Answer 3 questions only

 The total number of questions is 8
 All questions carry equal marks
 Cross through/delete any material you do not wish to be considered
 No credit will be given for additional questions attempted
Please note that you should not use Studiosity or contact the learning development tutors
for the completion of this assessment.

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 Questions
Question 1
Neale (1964) proposed that achieving a measure of competitive balance was a primary
requirement for any successful competition. Using practical examples to illustrate your
argument, critically assess this proposition making reference to other possible key
drivers of demand for sport competitions.
Question 3
Define the European model of sport as it operates in men’s professional football.
Critically assess the vulnerability of this model to a potential “Superleague”
breakaway league.

Question 5
The freedom of professional footballers to move employers is severely restricted in a
manner which would be illegal in almost all other labour markets. Explain the
justification for these restrictions. Are they justified?

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 Question 1 Answer
Leagues and team owners have used the concept of competitive balance to justify

restrictions on players' and teams' conduct, including transfer fees, revenue sharing, and salary

caps. Since the ideas of the uncertainty-of-outcome hypothesis (UOH) presented by Neale

(1964) competitive balance has been a crucial element of sports economics. The UOH addresses

a key reason why people have fun and enjoy themselves while attending sporting events. This

entails fan interests being proportional to the quality of leagues in terms of talent or

remarkable ability among teams. Neil’s competitive balance argues that the format of

competitiveness should entail a cooperative feature that allows no particular team to be more

advantaged than the other.

Competitive balance is therefore presented as a way of ensuring fans do not lose

interest in the weak teams and the entire competition eventually. Neale (1964) posits that an

increase in output volatility increases competitive balance resulting in relative quality. Relative

quality is the consistency of competitiveness between sports teams offering viewers

entertainment value is referred to as relative quality.  Relative quality is attained through

uncertainty in competition outcome commonly referred to as "the ambiguity of the outcome. In

Major League Baseball (MLB) wage control is among the main ways of attaining competitive

balance. MLB also created one of the most effective methods for ensuring competitive balance

through its luxury tax. The luxury tax mechanism aims to maintain a competitive balance and

cut down on wasteful spending. Using progressive brackets, teams are penalized anything from

17.5 percent on every dollar spent above the threshold (first-time offenders) to 50 percent on

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every dollar spent over three-time offenses (MLB, 2021). Therefore, the more tax mechanisms

are able to influence performance and uncertainty of results the higher the chances for

improved competitiveness.

Another approach for the MLB to ensure the competitive balance is through the

Competitive Balance Lottery, a relatively new feature of the MLB draft that allows teams who

qualify to get additional high-level picks, from the ten smallest markets. Other methods of

ensuring competitive balance include what is known as free agency, which refers to a player's

right to freely sign with any team or organization after completing the required service period

of four years. On the other hand, market size generates a plethora of marginal revenue curves,

since teams with more revenue potential see higher revenue increases as their winning

percentage rises. Benefit-maximizing teams can only buy talent until the cost of an extra talent

unit equals the marginal income of that talent unit. This implies that, at market equilibrium, a

team with a high-income potential will require more talent than a team with lower revenue

potential, resulting in a competitive imbalance.

The relative differences in league standings between teams are a highlight of

competitive balance in a league. Neale (1964) states that “there is excitement in the daily

changes in the standing or the daily changes in p0ssibilities of changes in standings” (3). The

bigger the gate receipts will be the closer the standings are, and the more frequently the

standings move within any range of standings. As a result, providing the race service for free

has a positive feedback effect on gate receipts, which we might consider advertising. Poor club

standings induce crowd disinterest and that’s why the premier league is the most competitive

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football league globally as competition throughout the league table is stiff. Because there was

so much to do with giant-killing, the FA Cup was seen as a representation of competitive

balance in football development. A victory by a team that is at least two divisions below

the opponent is giant-killing. In the 1970s, there were four big killings on average per season.

However, as money from television and other sources poured into football, especially the large

teams, giant-killing in the FA faded away. There were only two in the 1990s because the large

clubs had acquired most of the talent (Szymanski, 2000). Competitiveness especially for the cup

competitions is focused on the ability of small clubs to win over the big clubs. The survival of

the FA cup as one of the oldest cup competitions is a testament to the importance of

competitive balance.

Competitive balance is also represented in the form of distributive financial balance

within the league. For example, the distribution of franchises in the United States and Canada

helps build the quality of different clubs reducing its ability to diminish the minimum average

cost per constant quality game seat. The National Hockey League has solved financial disparities

by enacting a revenue-sharing policy that forces financially stronger franchises to split a portion

of their earnings with financially weaker franchises (Kiuru, 2016). Given the NHL's ongoing

growth into new economic areas, this may be the only viable method to keep the organization

even remotely financially competitive. There is also the free movement policy implemented in

European sports is a major indicator of how competitive balance is ascertained as it allows for

clubs to have a fair distribution of talent throughout a season (Szymanski, 2003). The policy also

allows for clubs that compete in major leagues but invest in the training and development of

players to have redistributive revenues needed to run their affairs. This is attained through
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youth players’ schemes that guarantee a certain developmental cost is covered before players

could have multiple professional transfers.

To summarize, professional sports leagues should build an athletic and financial

competitive attribute across the board in order to maintain competition in the game. The

nature of the industry dictates that any competitors must be almost equal in size in order to

succeed. When it comes to enhancing the total economic impact of the sports business,

competitive balance is crucial.

References

Kiuru, J. (2016). The formation of competitive balance in the National Hockey League (Master's

thesis).
MLB, (2021). “Competitive Balance Tax”. Retrieved from
https://www.mlb.com/glossary/transactions/competitive-balance-tax
Neale, W. C. (1964). The peculiar economics of professional sports. The quarterly journal of
economics, 78(1), 1-14.
Szymanski, S. (2000).`The Decline of the FA Cup: Is Manchester United’s Withdrawal Merely A
Symptom of the Competition’s Transgression?’. Soccer Analyst, Vol. 2, Issue 2. Pages 3-
8.
Szymanski, S. (2003). The economic design of sporting contests. Journal of economic
literature, 41(4), 1137-1187.

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 Question 3 Answer
The European Model of Football

The European model of football allows teams to enter into the competition through

promotions and relegations based on sports merit. This system of relegation and promotions

such as movement from championship to the premier league means that teams at the bottom

tier have a chance to compete with bigger brands. The model is also based on a pyramid system

with mutual solidarity, with grassroots sport, at the bottom – where everyone has the

opportunity to participate in sport locally, promoting the idea of sport for all (Szymanski, 2003);

and elite sport at the top – where athletes of all ages and abilities can compete at different

levels. the bottom group allows players to progress from the bottom of the pyramid and

raise the profile of European competitions.

Broadcasting revenue is a crucial source of sports revenue. Other developments like the

sale of the broadcasting rights to Sky Sports continue to depict the increasing content value.

Broadcasting rights in EU football are shared among the clubs with the big clubs getting a

slightly bigger share of the rights and other commercial revenue since subscriptions and

spectators emanate from their popularity (Szymanski, 2003). The popularity of these top teams

is also a product of high player mobility within the top teams tremendously improving their

competitiveness.

EU football also allows competitive market forces to influence the purchase of players,

running of clubs and own investments as long as they conform to the financial fair play

established by FIFA. Football ownership has therefore attracted funding from Asia to channel

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funds into developing brands that will be critical in the individual merchandising of club

products. The competitive labor market in European football means that each club has its own

unique value as influenced by financial capability and participation in elite European games like

UEFA and Champions League competitions. FIFA and UEFA are among the major federations

tasked with partnering with EU regulatory bodies to maintain the standards of football through

facilities checking, referees training, and grassroots participation (Szymanski, 2003). These

organizations are also tasked with ensuring competitions are managed as per sports calendar

and promote c competitive balance.

The super league was formed to challenge the exclusivity depicted by FIFA and UEFA in

EU football. UEFA and FIFA are seen as having exclusive control of European sports acting both

as regulators of financial use and entry in competitions. UEFA’s growth in revenue has been

consistent over the years. The growth of UEFA has been witnessed despite the dissatisfactory of

clubs and owners over the control and running of the institution. UEFA is an administrative

body tasked with managing and ensuring the good values of football are maintained. However,

it works also as one of the major event promoters, receiving television and commercial income

from popular sporting events. Football clubs have therefore been left with limited revenue. The

formation of the super league is such that the clubs get a say in election of officials managing

the regulatory body in charge of their affairs.

The commercialization of football is something that sports management stakeholders

are increasingly demanding. The super league was born out of the fact that major teams only

get a little amount of money from sports commercialization while being the center of attention

for fans globally. The Super League was founded on the commercial idea of creating a closed
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league for the biggest clubs in Europe. The teams will then face each other frequently,

increasing the value of television rights, advertising, and ticket sales. Domestic leagues,

especially outside of England, have been incredibly uncompetitive, which has encouraged the

ESL business model and similar suggestions. Well-funded clubs in the open-league have carved

out dominance resulting in isolation from the rest of their competitors, a trend that will only

intensify as globalization favors the largest, most entrenched names while gradually leaving the

rest behind. For example, in Serie A, Juventus won the scudetto for nine years in a row. The

creation of the super league was therefore a product of need to maximize big clubs growing

commercial interests which are not the same as the other open league members.

The Super League's revenue generation would aid the teams in developing a long-term

economic strategy that capitalized on their massive fan base. Growing market uncertainties in

the existing broadcasting rights and commercial revenue sharing scheme, which may quickly

result in significant indebtedness for the big teams, influenced this decision. According to Joel

Glazer vice-chair of the Super League and co-owner of Manchester, United’s idea offered a

"new chapter for European football" (Carrington, 2021). The idea of European giants like

Liverpool, Manchester United, Barcelona, and Chelsea playing each other regularly would have

guaranteed more revenue distributed among fewer clubs. Each team would have received up

to 350 million euros just for signing up (Carrington, 2021). For the founding clubs, the Super

League signified a new financial chapter that would end the uncertainties associated with the

current operational model.

The billionaire foreign owners welcomed in EU football by officials and politicians over

the last two decades are typically backed by a desire to increase revenue. The American owners
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of Liverpool, Manchester United, and Arsenal, in particular, are perceived as prioritizing income

over reputation, in contrast to those from Russia at Chelsea. With COVID’s impacts on football

financial sustainability, the super league offered a chance for the long-term viability of clubs

whose owners are perpetually in debt. With the existing operational model, where club

valuations are high, a sudden change in ownership is difficult to actualize because the number

of potential buyers with the means or interest to buy such clubs is limited. Therefore, the drive

to grow clubs as businesses and attract audiences will continue until such clubs are placed up

for sale, especially following the unprecedented financial crisis of the last year.

References

Carrington, B. (2021). The Super League lived and died for the same reason: Because money

rules soccer. The Washington Post. Retrieved from

https://www.washingtonpost.com/outlook/2021/04/23/super-league-americanization-

soccer/

Szymanski, S. (2003). The economic design of sporting contests. Journal of economic

literature, 41(4), 1137-1187.

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 Question 5 Answer
Players who are in the middle of a contract with a club, particularly in one EU Member

State, and want to transfer to another will face several obstacles. The EU's handling of the

transfer market and movement of players suggests that football is considered to be a special

sport. The free movement policy was particularly established to maintain a competitive balance

between the clubs by ensuring there is some equality and uncertainty for the results due to the

significant role that football plays in the region. The competition integrity is therefore the main

pillar against which sport's governing bodies focus on upholding as they adopt various norms,

customs, and traditions that regulate the sport.

Competition integrity is critical for the development and following of sports globally. The

transfer market works as a tool to ensure competition integrity is maintained by preventing

footballers from switching clubs midseason and destabilizing teams. The failed European super

league possesses characteristics of a closed league where financially capable teams compete

for the championship. These clubs possess a privileged status that is depicted in their

dominance at both European and League levels. The purpose of transfer rules is to address

fairness and create a competitive balance that limits such clubs from financial unfairness in

talent access, facilitating the sustainability of football. Smaller league clubs and the Big Five

leagues require Allowing transfers to take place during the season will benefit established clubs

who can spend at any time while maintaining a smooth seasonal operation. This challenge is

overcome by implementing financial compensation between clubs and youth development

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schemes that align with the free movement policy. The schemes allow for financial

redistribution across various league levels, facilitating football sustainability

Professional football players are also limited unless there is a mutual agreement

between the parties. If a player moves without the club's consent, then the contractual liability

must be handled by the new club. If the movement occurs in the early stages of a player's

career, they may face a suspension from football. This rule is in place to ensure contractual

stability in the football market, ensuring that both parties adhere to the terms of the contract

to avoid players changing clubs during a competition, affecting the competition's fairness

(Laskowski, 2019). If no compensation amount is specified in the contract, the compensation

must be calculated based on the situation mandating a move (Laskowski, 2019). For example,

early termination of an employment contract can be a source of dispute. The case is solved by

looking at the merits presented by the party seeking to terminate the contract early. If it can

use a legal or collective bargaining agreement-provided reason for termination, the termination

will be considered justified. If no legally justified grounds for the request are received, a legal

settlement has to be reached. The restrictions to movement, therefore, play a crucial role in

solving arising contractual issues while maintaining the competitiveness of pro-football.

Younger players also have far less freedom than older players, and they are subject to

restrictions even after the conclusion of their contracts. This restriction on the young players'

movement is intended to ensure the grassroots development of football at the grassroots level.

In 2008 CJEU ruled in the Bernard case stipulating a scheme guaranteeing financial

compensation to a player's training club after the player signed a professional contract with a

different club (KEA and CEDS, 2013). The goal of the scheme is to encourage the training of
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young players. Otherwise, training clubs, particularly small football clubs operating locally, may

be discouraged from investing in youth player development. The investments of local clubs in

training are crucial in whose investment in scouting, recruiting, and training young footballers is

critical to sport's social and educational function. Training clubs, as a result, demand

compensation for the actual cost of training, which is factored not only from the individual

costs but also from the club's overall training costs. The compensation is then split depending

on the role played by each club in player development. This rule is also flexible as the amount

of compensation received by the club influences the player's freedom of movement.

Players cannot easily change employees to help conform to the transfer requirements

for sports specificities. Specificity of sport is the regulations that set football apart from other

socio-economic employment activities. Sport specificities guide derogations from labor law and

employment regulations that guide player transfer. According to FIFA Dispute Resolution

Chamber (DRC) decisions, player dismissal from the contract for prolonged injuries is a violation

of their rights (KEA and CEDS, 2013). This would otherwise be permissible in other socio-

economic activities as a fair reason for dismissal. Therefore, EU rules on free movement

consider that football is a unique athletic activity that demands matters to be solved amicably

and more fairly.

Restrictions imposed on the movement of professional football players is justified as it

maintains the competitive balance between teams and nurtures the sport. Restricting free

movement until the opening of the transfer market means that all clubs, big or small, have the

same window to get their affairs for player recruitment and release. The period also allows

small clubs responsible for developing talented players to get regular payments that sustain
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their activities. Young players are further restricted from entering multiple contracts until their

estimated training costs from previous clubs are catered. Therefore, the football market is

sustained by ensuring each stakeholder in player development has a share of the growing

player values. The contractual responsibilities of both the clubs and players are also protected

under the free movement policy, ensuring the league seasons are not interrupted.

References

KEA and CEDS, (2013). The Economic and Legal Aspects of Transfers of Players. Retrieved from

https://ec.europa.eu/assets/eac/sport/library/documents/cons-study-transfers-final-

rpt.pdf

Laskowski, J. (2019). Solidarity compensation framework in football revisited. The International

Sports Law Journal, 18(3), 150-184.

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