This thesis analyzes the strategic situation that allows sports teams in the US to secure large subsidies from cities. Using a simple league model and a two-period subsidy auction model, the paper establishes conditions under which a league will strategically leave viable cities open to extract greater subsidies in the future. That finding is then compared with historical subsidy data for NFL, MLB, NBA, and NHL teams. To that end, historical data on the largest open markets in each of the Big Four leagues was compiled independently for this paper. However, a regression of subsidies on open market size fails to provide evidence of the relationship predicted by the league and subsidy auction model. Additionally, linear regression shows that metropolitan population explains at most half of the variation in team revenues, contrary to the league model’s assumption that revenues are determined entirely by metro population.
