tailieunhanh - Lecture Economics of social issues - Chapter 9: The economics of professional sports: What is the real score?

The business of professional team sports provides an example of imperfect market structures. A unique characteristic of professional sports is the interdependence of teams. A professional team can be successful only if its competitors are successful. In this chapter, we will address the following question: The economics of professional sports: What is the real score? | Chapter 9 The Economics of Professional Sports: What Is the Real Score? Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 9- The Professional Sports Business Organizational Structure Privately owned teams Professional sports leagues League franchises Teams and Players Productivity is visible and easily measured Salary issues Contract issues 9- The Product Market Cooperation among teams Professional sports leagues as cartels Baseball’s antitrust exemption 9- Characteristics of Successful Cartels Cartel members responsible for most of output generated by market Cartel members produce fairly homogeneous outputs Cartel must be able to divide market into territories controlled by each member and to establish production quotas Cartel must be able to prevent cheating by members 9- Coordinated Behavior Revenue sharing Joint marketing 9- Pricing and Output for Broadcast Rights 1 2 3 4 5 6 7 Units of Output Total Cost ($000) Marginal Cost ($000) Price ($000) Total Revenue ($000) Marginal Revenue ($000) Profits ($000) 0 0 100 0 1 40 40 100 100 100 60 2 85 45 95 190 90 105 3 135 50 90 270 80 135 4 190 55 85 340 70 150 5 250 60 80 400 60 150 6 315 65 75 450 50 135 7 385 70 70 490 40 105 8 460 75 65 520 30 60 9 540 80 60 540 20 0 10 625 85 55 550 10 275 9- Pricing and Output for a Cartel Quantity per unit of time Price ($000) 1 2 3 4 5 6 7 8 10 20 30 40 50 60 70 80 90 100 MC D MR D C A B 9- The Number and Location of Teams Baseball’s attempt to close “small-market” teams Incentive to relocate teams 9- The Stadium Controversy Public financing of stadium construction and renovation Justification for public financing Satisfy local public’s demand for sports entertainment Status for community jobs and tax revenue Evidence on impact of sports franchises Teams, Players, and Salaries in Professional Sports, 2008 9- NFL MLB NBA NHL Number of Teams 32 30 30 30 Number of Players | Chapter 9 The Economics of Professional Sports: What Is the Real Score? Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 9- The Professional Sports Business Organizational Structure Privately owned teams Professional sports leagues League franchises Teams and Players Productivity is visible and easily measured Salary issues Contract issues 9- The Product Market Cooperation among teams Professional sports leagues as cartels Baseball’s antitrust exemption 9- Characteristics of Successful Cartels Cartel members responsible for most of output generated by market Cartel members produce fairly homogeneous outputs Cartel must be able to divide market into territories controlled by each member and to establish production quotas Cartel must be able to prevent cheating by members 9- Coordinated Behavior Revenue sharing Joint marketing 9- Pricing and Output for Broadcast Rights 1 2 3 4 5 6 7 Units of Output Total Cost