John Fizel, Elizabeth Gustafson, and Lawrence Hadley
The sports industry continues to be the focus of much research by professional econmists. A few seminal contributions by Simon Rottenberg ( 1956), Walter Neale ( 1964), James Quirk ( El-Hodiri and Quirk, 1971), Roger Noll ( 1974), Gerald Scully ( 1974 b), and George Daly ( Daly and Moore, 1981) have been followed by an explosion of research in the past fifteen years. The reason for this, in our view, is that the sports industry provides unusual opportunities for both theoretical and empirical research.
A central issue addressed on the theoretical side of sports economics research is the duality of market cooperation and market competition that is unique to the sports industry. Walter Neale was the first to analyze the "peculiar economics of professional sports" in his seminal 1964 article. The industry is unique because the legitimate monopoly goals of the team owners must be balanced against their illegitimate monopoly objectives. That legitimate goal is the preservation of competitive balance on the playing field. Without this balance, fans lose interest in the game and the league is an economic failure. The illegitimate monopoly objectives of the owners are the exploitation of the fans and the players. Owners appear to use their monopoly power in the product market to restrict output by limiting the number of teams. In the past (and perhaps even to some extent in the present), they appear to have used their artificial monopsony power to capture monopoly rents from the players. The theoretical problem for sports economists is to develop a model with policy prescriptions for achieving balance with neither monopoly nor monopsony exploitation.
The empirical side of this body of research exhibits almost limitless opportunities to test various economic hypotheses related to market structures. These seemingly endless opportunities are largely due to the nature of the available data. These data are