Estimating the Value of Brand Alliances in Professional Team Sports

Brands often form alliances to enhance their brand equities. In this paper, we examine the alliances between professional athletes (athlete brands) and sports teams (team brands) in the NBA. The athlete brands and team brands are matched to maximize the total added value created by the alliance. We obtain the athlete brand’s and the team brand’s respective gains from their alliance by estimating a structural two-sided matching model using a maximum score method. Our data contain contracts signed from the 1994-1995 season to the 2004-2005 season, including the shortened 1998-1999 season which saw a new restriction on maximum individual salary. Our empirical results indicate that the optimal alliance partners depend on team and player type, as well as the regulatory environment. While a superstar player would gain most matching with a high brand-equity team, a good player who is not a superstar (a “star”) could be better off matching with a medium brand-equity team. To investigate the effect of maximum individual salary implemented in 1998-1999 season, we separately estimate the matching model for the period before and the period after the 1998-1999 season. Our results suggest that the maximum individual salary policy benefits the high brand equity teams most in attracting superstar players, perhaps because the policy restricts the ability of low brand-equity teams to attract the better players through higher salaries. More generally, we find evidence that brand alliance partners affect brand equity.