Deviations From Equity and Parity in the National Football League

Abstract

This article examines the implications of exceptions to the National Football League's (NFL) earlier principles of financial equity and competitive parity across teams. The exception to financial equity is that revenue from premium seating is not shared. The exception to competitive parity is that the salary cap, used to engender parity, does not include coaching salaries. The fact that teams, along with stadium owners, can exchange general seating for premium seating makes the degree of revenue sharing an endogenous variable. Empirical evidence suggests that teams in larger, wealthier markets have a greater incentive to increase the number of premium seats, and thus reduce the degree of revenue sharing, and to acquire greater coaching talent. The evidence also indicates that teams in larger, wealthier markets earn significantly more revenue, much of which is unshared revenue, and on the margin, have a greater probability of making the playoffs.