The Economics of Sports

The Economics of Sports

The Economics of Sports

The Economics of Sports

Excerpt

Open to the sports pages of your local newspaper today and you are likely to find that discussions of the economic aspects of sports occupy as much space as do the results of the games. As Americans' discretionary incomes have risen, so has their demand for sports, as both participants and spectators. As a consequence of this increase in demand, we are now witness to professional athletes commanding long-term contracts of over $100 million. Cities are bidding against one another to acquire professional sports franchises with offers of new stadiums costing upwards of $500 million. Spectators are willing to pay “street prices” as high as $3,200 for tickets to the Super Bowl and $4,000 for tickets to college basketball's “Final Four.” And professional sports owners and players' unions perennially talk about the possibility of strikes to resolve their differences over dividing up the multibillion dollar sports revenue pie. Clearly, sports has become “big business.”

As the sports industry has grown, it has attracted the attention of economists, and sports economics is now a growing subfield within the economics profession. The organization of the sports leagues has been fertile ground for economists interested in industrial organization questions. The labor markets for professional athletes have been of interest to labor economists, given the abundance of statistics related to player performance and productivity and the unique features of these labor markets such as the National Basketball Association's (NBA) salary cap. The development of free agency in sports, the behavior of the National Collegiate Athletic Association in regulating collegiate sports, and the growing use of “personal seat licenses” by National Football League (NFL) teams have provided additional opportunities to observe and measure the effects of monopsony power, the behavior of cartels, and the practice of price discrimination.

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