Midterm 1 Sports Economics Flashcards
Are Competitive Markets good for society?
Yes, in most cases. Definitely in sports.
Firm Goals
- Profit maximization
- Firm Valuation
- Annuities and Players K
Normal goods
As you get richer you buy more of it (ex.organic foods)
Inferior Goods
As you get richer you buy less of it. (ex. Mr.Noodles)
If we lower ticket Prices?
we gain consumer Surplus
Do teams maximize profits/ticket revenue?
No, they try to maximize winning
Nash Equilibrium
Outcome where everyone chooses a response that is best for everyone
Simultaneous Decisions
Where both players act before knowing what the other is going to do
Sequential Games
Where you have a look at the other team before you make your move (football and chess)
What does Price Discrimination require
Market Power
Perfect Price Discrimination (1st degree)
when a business charges the maximum possible price for each unit consumed. ex. CFB tickets for students vs GA
Indirect Price discrimination (2nd degree)
- Consumers choose an option (ex. season vs individual tickets)
- Q discounts and hurdle pricing
- hurdling is when you try to get a cheaper price by lining up - Bundling, Quality Variation (think seating)
Marginal Revenue
How much extra revenue is contributed if the team wins
Discrimination
Measuring salary differences between ethnicities, language and gender
How do leagues act as Cartels? /3
- Oligopoly
- Cartel Behaviour
- Competition/anti-trust policy
Can effort to outcomes be “too strong”?
Yes, in theory leads to negative utility
If Gammas is less than 1 how many participants can you have?
Any # of participants
What does an increase in the cost of effort do to Participants?
Reduces Participants Effort
Lambda tells us what?
The difference in skill
What Makes Sports worth watching /4
- betting
- Entertaining
- Learning tool for player s
- Loyalty to city/fanbase
Measuring Competitive Balance Game-to-game is done through?
Betting Markets
Within Season Competitive balance is measured by?
Non-Scully Measures (Standard deviation of winning percentages)
Measuring competitive balance Decade-to-Decade uses?
Herfindahl-Hirschmann Index
How to Calculate the Probability of Winning a Bet?
NY = -290
Pitt = +225
NY -290
Pitt +225
Pw = PWBe + (1-Pw)(odds of you winning)
Pw(NY) = PW100 + (1-Pw) * (-290) > 0
Pw (NY) = 74.46%
Pw(Pitt) = Pw225 + (1-Pw)*(-100) > 0
Most competitive Leagues /2
- Hockey
- Soccer
Middle-Range leagues on competitiveness /2
- Football
- Baseball
Least Competitive Sport /1
- Basketball
Has Baseball gotten more balanced competitively overtime?
Yes
Game Balance within Season if all teams are equal?
Standard Deviation = 0.5/sqrt(G)
G = # of Games Each Team Plays
Where do Teams get most of there Revenue? /3
- Ticket Sales
- Broadcasting Deals
- Stadium/Venue Revenue
Examples of Team Revenue? /2
- Ticket Sales (MLB)
- Local TV Deals
Examples of Shared Revenue? /2
- National TV Deals
- Ticket Sales (NFL)
MR=?
MC
Aggregate Expenditure =
C+I+G+X-M
Static is what type of decision?
Simultaneous
Dynamic is what type of decision?
Sequential
Mixed Strategy Definition
A Probability of taking each of two or more possible actions
