Sports Economics ECON 04269 - 1
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This 3 page Study Guide was uploaded by Nicole Rossi on Saturday April 30, 2016. The Study Guide belongs to ECON 04269 - 1 at Rowan University taught by Lauren Banko in Spring 2016. Since its upload, it has received 107 views. For similar materials see Sports Economics in Economcs at Rowan University.
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Date Created: 04/30/16
Sports Economics Final Review Topics Tuesday May 3 , 2016 2:45 -4:45pm Newer topics: Labor markets How to measure a players’ worth Why are players so highly paid Labor supply and demand Monopsony of Leagues Discrimination (history) o Costs o How to end it? Why are athletes so highly paid? Teams are acting like monopsonsies. There is a restricted amount of room. To measure their worth, it gets complicated. We want to measure their marginal revenue product of labor (MRPL). Players have “monopoly” power over their abilities. Players have a fairly small pool of bodies able to perform, and those athletes have opportunity costs. These drive up wages. These leagues have a reserve clause to a certain extent. The reserve clause is b/c a team is investing in you, and you are getting inside information, so they want to be able to retain these for some time. Unions give team’s monopoly power when they are on teams. They try to act like a monopoly, by reducing the number of players that can play (making sure wages are high). Craft: a specific skill, industrial: all areas. This will drive up the wages. By going through arbitration, you are attempting to get a better wage. In baseball we have final offer arbitration, and it is binding. This says that you as a player should receive this much, the team says I think you should receive this amount, and then the arbitrator picks a side, and they both have to agree with it. This is in attempt to lower the wage spread between players and teams. Standard binding arbitration: where there is no final offer. The workers believe they are worth so much, and the teams believe they should be worth lower amounts. The arbitrator can pick either wage rate, or anywhere in between. Discrimination: started out with the “out-right” discrimination, it wasn’t in the rule book, but the owners of a team agreed to not have any black players on their team. Economists believe if the markets work, discrimination will go away. Discrimination is costly--may be hiring players at a higher rate, because they are white. When it’s not outright discrimination it’s difficult to see if there is discrimination. Equal pay for equal work, equal access. Harder to see women discrimination because they aren’t playing against each other. Funding of Stadiums/ Teams Public vs. Private o When/ why did this change? Idealism Why do we publically fund these? When is it beneficial? o Public goods and externalities o Market failures When is it costly? o Who bears the burden? Other effects? Unobservables? becoming more popular to publically fund stadiums. this is due to the popularity of sports. This gives both the team and the cities monopoly power. Moving to a city with the promise of a new stadium or just staying in that city. Stadiums are public goods- too little quantity when privately produced. Another reason to fund stadiums is because of the positive externalities’, which are greater than the negative. These stadiums came become too costly. Who bears the burden? The tax payers in that immediate area and the surrounding areas. Maybe a small amount on collegiate sports Colleges as a monopsony--only buyer of an athletes talent Benefits to athletes Drain of resources? What about sports that don’t generate revenue? colleges act like a monopsony because if you do what you go to college, you are going to have to go to college and find one that wants your talent. They don’t get paid, but they get scholarships to go. Benefits: scholarships, attention, possibility of becoming a “pro” athlete; Benefits towards the school: more attention, revenues from football and basketball, these go towards other programs. To the sports not generating revenues, they create positive benefits to the students so colleges keep them, they can stay healthy, still get scholarships, make friends, good for the school (attention) From the Midterm: Econ basics Supply and Demand o Concepts o drawing them on a graph with changes in either Types of products o Complements vs. substitutes Elasticity and its meaning o Formula Market Structure Elasticity: example: parking: $10 for 16,000 cars, $15 for 11,000 cars, Elasticity= (Q2-Q1)/(Q1)//(P2-P1)/(P1), so for this example, it’s 11,000- 16,000/16,000//15-10/10= -0.625, inelastic Profit- maximization vs. Maximizing wins Pricing- In a monopoly Vs. Pure Competition Seat Capacity Marginal Revenue Costs and marginal costs Variable and fixed costs win more=pay for talent, more costs higher profits= play less profit maximization is the ultimate goal Costs= fixed costs: players’ salaries, coaches’ salaries, rent variable costs: concessions, wages for workers MC=0 Revenues All types + examples gate/ticket/venue revenues, broadcasting brings in the most revenue Licensing= when you sell goods with the brand name on it. League Transfers= within C.B you see league transfers, if you have a high payroll, it’s above the payroll cap, you have to pay a tax. Competitive Balance Who cares and why? Definition C.B makes the sport an even playing field. Ways to achieve it: salary caps, transfers, reverse order draft picks It’s important for the fans of the sport.
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