Welcome to The Economics of Sports! Michael A. Leeds 106E Speakman Hall
Two Important Warnings This is an ECONOMICS course Need not “know sports” Can discuss boxscores – after class Text: The Economics of Sports Numerous Links on Blackboard Will assign “current” readings
Technological Matters You should all be on Blackboard Vital for Communication/Information Occasional readings Grading If not – see me ASAP Syllabus on Blackboard – read it!
Keys to Success Read twice Skim before class Read carefully afterward Review notes weekly See me if confused
Overview of Course Review of Basic Economics Will largely assume you know this – see me if you do not! Industrial Organization Do Teams/Leagues Maximize Profits? Do/Should Antitrust Laws Apply? Public Finance Why/how do cities finance facilities? Labor Why Do Athletes Make So Much? Unions & Discrimination The NCAA, the Olympics, and Amateur Sports
Review of Basic Economics Will cover just a few highlights: The irrelevance of fixed costs Impact of A-Rod on Ranger ticket prices The importance of capacity constraints Do Phillies charge too much? Do Flyers charge too little? Uncertainty and Risk Is losing a good strategy? Why sell season tickets?
Maximizing Profit How do we define profit? = TR-TC Where are profits maximized? MR=MC What do Rangers sell? What kind of cost is Alex Rodriguez’s salary?
Phillies Pricing Strategy A monopoly Demand slopes down What is MR? Why does it look like this? MC a backward “L” Does it pay to sell out? $ MR D MC PePe QeQe
How About the Flyers? First Union Center holds ~17,000 Veterans Stadium held ~60,000 Should Flyers sell out? What about prices? P MCMC MR D MC PePe QeQe
Uncertainty: Can Losing be a Good thing? 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? First of several reasons
Can Losing be Good? Cleveland Browns won all the time in AAFC Fans of AAFC lost interest Even Browns fans Attendance fell Attendance fell in MLB in 1950s NY teams in every World Series (sort of) Why go see Pittsburgh play Cincinnati? Study looked at attendance in MLB Controlled for day, time, weather, quality of opponent Attendance highest when home team won 60% of time
Season Tickets Transfers risk from team to fans Why would fans assume risk? What other reasons? Do teams want to sell only season tix?