Bài giảng Economics of Social Issues - Chapter 9 The Economics of Professional Sports: What Is the Real Score?

Chapter 9The Economics of Professional Sports: What Is the Real Score?Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin9-2The Professional Sports BusinessOrganizational StructurePrivately owned teamsProfessional sports leaguesLeague franchisesTeams and PlayersProductivity is visible and easily measuredSalary issuesContract issues9-3The Product MarketCooperation among teamsProfessional sports leagues as cartelsBaseball’s antitrust exemption9-4Characteristics of Successful CartelsCartel members responsible for most of output generated by marketCartel members produce fairly homogeneous outputsCartel must be able to divide market into territories controlled by each member and to establish production quotasCartel must be able to prevent cheating by members9-5Coordinated BehaviorRevenue sharingJoint marketing9-6Pricing and Output for Broadcast Rights1234567Units of OutputTotal Cost ($000)Marginal Cost ($000)Price ($000)Total Revenue ($000)Marginal Revenue ($000)Profits ($000)00100014040100100100602854595190901053135509027080135419055853407015052506080400601506315657545050135738570704904010584607565520306095408060540200106258555550102759-7Pricing and Output for a CartelQuantity per unit of timePrice ($000)12345678102030405060708090100MCDMRDCAB9-8The Number and Location of TeamsBaseball’s attempt to close “small-market” teamsIncentive to relocate teams9-9The Stadium ControversyPublic financing of stadium construction and renovationJustification for public financingSatisfy local public’s demand for sports entertainmentStatus for community  jobs and tax revenueEvidence on impact of sports franchisesTeams, Players, and Salaries in Professional Sports, 20089-10NFLMLBNBANHLNumber of Teams32303030Number of Players per Team53251223Average Team Revenue (millions)$221.56$182.96$125.50$91.56Average Player Salary (millions)$1.74$3.15$5.36$1.91Source: www.rodneyfort.com 9-11The Employment of PlayersAnnual draft of new playersExclusive rights to player services for a period of timeNo “tampering” rules9-12MonopsonyMonopsony – market with only one employerWhy are sports leagues monopsonies?Immobility of new players who have been draftedHighly specialized skills of players9-13Wages and Employment in a Monopsony12345Number of PlayersWage ($000)Total Cost of Labor ($000)Marginal Cost of Labor ($000)Marginal Revenue Product ($000)0001300300300150024008005001300350015007001100460024009009005700350011007006800480013005009-14Wage and Employment Determination for a MonopsonistLabor hired per unit of timeWage $000123456781002003004005006007008009001000SMRP = DCABMCLMonopsonisticProfit9-15Free AgencyReserve clauseLimited reserve clause and free agencyMean MLB Salaries Since Free Agency 9-16Source: Major League Baseball9-17Labor DisputesLabor unionsStrikes and lockoutsSalary capsRevenue sharing9-18Do Professional Athletes Earn Their Pay?How does player performance contribute to team revenue?Fans and willingness to payDoes anybody deserve such high pay?9-19Illicit Drugs and Professional SportsEach sports league has a substance abuse problemBans on “recreational” drugsBans in performance-enhancing drugsEconomic analysis of why players use performance-enhancing drugsExpected benefits versus expected costsHow to reduce the use of performance-enhancing drugsForfeiture of salaryIncrease probability of detection9-20The Case of Major League SoccerMLS a single-entity leagueAll teams owned by a single corporationInvestor-operatorsBroadcast rights, licensing, merchandizing centrally controlledEmployment contracts between player and leagueLeague allocates players to teamsIs MLS a monopsony?WNBA