Midterm 1 Sports Economics

Question 1

Are Competitive Markets good for society?

Answer 1

Yes, in most cases. Definitely in sports.

Question 2

Firm Goals

Answer 2

1. Profit maximization
2. Firm Valuation
3. Annuities and Players K

Question 3

Normal goods

Answer 3

As you get richer you buy more of it (ex.organic foods)

Question 4

Inferior Goods

Answer 4

As you get richer you buy less of it. (ex. Mr.Noodles)

Question 5

If we lower ticket Prices?

Answer 5

we gain consumer Surplus

Question 6

Do teams maximize profits/ticket revenue?

Answer 6

No, they try to maximize winning

Question 7

Nash Equilibrium

Answer 7

Outcome where everyone chooses a response that is best for everyone

Question 8

Simultaneous Decisions

Answer 8

Where both players act before knowing what the other is going to do

Question 9

Sequential Games

Answer 9

Where you have a look at the other team before you make your move (football and chess)

Question 10

What does Price Discrimination require

Answer 10

Market Power

Question 11

Perfect Price Discrimination (1st degree)

Answer 11

when a business charges the maximum possible price for each unit consumed. ex. CFB tickets for students vs GA

Question 12

Indirect Price discrimination (2nd degree)

Answer 12

1. Consumers choose an option (ex. season vs individual tickets)
2. Q discounts and hurdle pricing
   - hurdling is when you try to get a cheaper price by lining up
3. Bundling, Quality Variation (think seating)

Question 13

Marginal Revenue

Answer 13

How much extra revenue is contributed if the team wins

Question 14

Discrimination

Answer 14

Measuring salary differences between ethnicities, language and gender

Question 15

How do leagues act as Cartels? /3

Answer 15

1. Oligopoly
2. Cartel Behaviour
3. Competition/anti-trust policy

Question 16

Can effort to outcomes be “too strong”?

Answer 16

Yes, in theory leads to negative utility

Question 17

If Gammas is less than 1 how many participants can you have?

Answer 17

Any # of participants

Question 18

What does an increase in the cost of effort do to Participants?

Answer 18

Reduces Participants Effort

Question 19

Lambda tells us what?

Answer 19

The difference in skill

Question 20

What Makes Sports worth watching /4

Answer 20

1. betting
2. Entertaining
3. Learning tool for player s
4. Loyalty to city/fanbase

Question 21

Measuring Competitive Balance Game-to-game is done through?

Answer 21

Betting Markets

Question 22

Within Season Competitive balance is measured by?

Answer 22

Non-Scully Measures (Standard deviation of winning percentages)

Question 23

Measuring competitive balance Decade-to-Decade uses?

Answer 23

Herfindahl-Hirschmann Index

Question 24

How to Calculate the Probability of Winning a Bet?
NY = -290
Pitt = +225

Answer 24

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

Question 25

Most competitive Leagues /2

Answer 25

1. Hockey
2. Soccer

Question 26

Middle-Range leagues on competitiveness /2

Answer 26

1. Football
2. Baseball

Question 27

Least Competitive Sport /1

Answer 27

1. Basketball

Question 28

Has Baseball gotten more balanced competitively overtime?

Answer 28

Yes

Question 29

Game Balance within Season if all teams are equal?

Answer 29

Standard Deviation = 0.5/sqrt(G)
G = # of Games Each Team Plays

Question 30

Where do Teams get most of there Revenue? /3

Answer 30

1. Ticket Sales
2. Broadcasting Deals
3. Stadium/Venue Revenue

Question 31

Examples of Team Revenue? /2

Answer 31

1. Ticket Sales (MLB)
2. Local TV Deals

Question 32

Examples of Shared Revenue? /2

Answer 32

1. National TV Deals
2. Ticket Sales (NFL)

Question 33

MR=?

Answer 33

MC

Question 34

Aggregate Expenditure =

Answer 34

C+I+G+X-M

Question 35

Static is what type of decision?

Answer 35

Simultaneous

Question 36

Dynamic is what type of decision?

Answer 36

Sequential

Question 37

Mixed Strategy Definition

Answer 37

A Probability of taking each of two or more possible actions