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Economics of Sports

Economics of Sports. Unit 2 Economics. Table 2-4 Teams, Population, and Per Capita Income, Major League Areas. Table 2-5 Correlations between NBA Attendance and Prices, 2000-2007. Supply (more supplied at higher prices, i.e. luxury suites)

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Economics of Sports

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  1. Economics of Sports Unit 2Economics

  2. Table 2-4Teams, Population, and Per Capita Income, Major League Areas

  3. Table 2-5Correlations between NBA Attendance and Prices, 2000-2007

  4. Supply (more supplied at higher prices, i.e. luxury suites) • Demand (more demanded at lower costs, i.e. sports programming on TV) • The irrelevance of fixed costs • Player’s salary

  5. Maximizing Profit • Recall: Profit = TR-TC Goal: Maximize profits? • Key question: What do the NY Jets sell? • Tickets! • Mark Sanchez’s salary is a fixed cost to the Jets • It is unchanged no matter how many tickets they sell • Signing Sanchez does not affect Marginal Costs

  6. Why Do Teams Raise Prices? • MC does not change – but Marginal Revenue might • More fans want to see the Jets play • Demand – and MR – increase • The Jets charge more because they can – not because they must

  7. Uncertainty • Are the Yankees bad for baseball? • Are dynasties a bad idea? • How often should the home team win? • Why do teams sell season tickets? • Why do fans buy them?

  8. Can Losing be Good? • Cleveland Browns dominated the old AAFC • Fans lost interest • Even Browns attendance fell • Attendance fell in MLB in 1950s • Dodgers, Giants, or Yankees were in every World Series • Why bother seeing Pittsburgh play Cincinnati? • A study has looked at attendance in MLB • Controlled for day, time, weather, quality of opponent • Attendance highest when home team won 60% of time

  9. Season Tickets • Pay for a December game in March • Transfers risk from team to fans • Why would fans assume risk? • Often pay lower price • Get preferred status for post-season

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