WELCOME TO ECONOMICS OF SPORTS 3123 David Kiefer DISCLOSURES This is an Economics course Need economics Do not need to know sports Quantitative reasoning statistics logic QB Tues and Thurs 2 00 3 20 SFEBB 170 kiefer economics utah edu office 373 OSH office hour Tues and Thurs 1 00 2 00 TEXTBOOK CLASS WEBSITE The Economics of Sports Leeds and von Allmen 5th edition 179 new online 211 U of U bookstore edition 4 used online Numerous links online Additional readings posted GRADING BEST OF THREE homework assignments final examination December 18th 1 00 3 00 40 The traditional 100 93 A 92 90 A 87 89 B 83 86 B 80 82 B and so on to 59 0 E 30 The curve with an overall average grade of B GPA 3 0 30 midterm examinations and November Communication Slides Sample exams Additional readings Grades Late papers lose 10 Identical papers not accepted Answer key will be posted in 3 weeks GRADING September You should all have access Syllabus posted 1st homework posted due in two weeks 4rd 24th Basic computer skills assumed statistics not Excel taught Statistics Using Computer Spreadsheets video Inferential Statistics and Multiple Regression video 3rd The ace the final rule WHY SPORTS OVERVIEW OF COURSE The one constant through all the years Ray has been baseball America has rolled by like an army of steamrollers It s been erased like a blackboard rebuilt and erased again Baseball marked the time This field this game is part of our past Ray It reminds of all that once was good that could be again Ohhhh people will come Ray People will most definitely come Review of Basic Economics Demand and supply elasticity monopoly Industrial Organization Do teams maximize profits Competitive Balance Public Finance Why do cities finance stadiums and arenas Labor Why do athletes make so much Monopsony and Unions The NCAA the Olympics and Amateur Sports REVIEW OF BASIC ECONOMICS COMPETITIVE MARKET Supply and demand Law of demand quantity demanded decreases as price rises other things equal substitutes Elasticity The irrelevance of fixed costs Law of supply Impact of Derek Jeter on Yankee ticket prices quantity supplied increases as price rises other things equal taxes The importance of capacity constraints Do Blackhawks charge too little Do White Sox charge too much Market equilibrium Uncertainty Is losing a good strategy MAXIMIZING PROFIT ELASTICITY Quantification of curve Elasticity is ratio of percentage changes 100 change in quantity e change in price Q Q p 1 p Q e p p Q slope Q p How do we define profit R C ticket 90 80 What is Yankee s revenue Where are profits maximized 70 60 50 40 30 20 10 Derek Jeter s salary is a fixed cost tickets 0 0 20 40 60 80 100 120 140 160 MR MC 180 200 MAXIMIZING PROFIT MAXIMIZING PROFIT Tickets Cost 0 20 40 60 80 100 120 140 160 180 200 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 Demand Revenue 100 Profit 100 90 80 70 60 50 40 30 20 10 0 0 20 40 60 80 100 120 140 160 180 200 Cost 3000 Revenue 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 0 1800 3200 4200 4800 5000 4800 4200 3200 1800 0 Demand 80 Marginal Revenue 70 Marginal Cost 50 40 30 20 10 tickets 0 0 Marginal Revenue R MR Q 20 40 60 80 100 120 140 160 180 200 WHITE SOX PRICING STRATEGY Marginal Cost MC C Q A monopoly Demand slopes down ticket Where is the MR curve Rule same intercept twice slope MC D US Cellular Field holds 40 000 MC backward L at capacity MR Does it pay to sell out tickets Perfect competition lower price 40 000 Demand p MC HOW ABOUT THE BLACKHAWKS UNCERTAINTY CAN LOSING BE GOOD Cleveland Browns won all the time in AAFC ticket Also a monopoly United Center holds 20 000 Should Blackhawks sell out What about prices Same price under monopoly and perfect competition 90 60 MC MR RULE Tickets ticket Even Browns fans lost interest Attendance fell MC Attendance fell in MLB in 1950s NY teams in almost every World Series Why go see Pittsburgh play Cincinnati MR Study of attendance in MLB tickets 20 000 Controlled for day time weather quality of opponent Attendance highest when home team won 60 of time THE END