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Abstract:
This paper considers a multi-firm analysis of a cartel. It examines the individual owner's choice of labor, the primary factor of production, and the cartel's choice of revenue sharing and salary cap policies in both a profit maximizing model and a utility maximizing model. The effect of decision making outcomes on labor market issues such as talent distribution and wages is explored. Cartel innovation and stability are discussed, especially the likelihood of adoption of institutional policies. The effect of the degree of the salary cap restriction (from unbinding to partially binding to completely binding) is examined. The optimal revenue sharing agreement and salary cap level are generally found to be 100% and 0%, respectively, from the owners' perspective. Wages are found to decrease with increases in revenue sharing and decreases in the salary cap level.

Abstract:
This paper considers a multi-firm analysis of a cartel. It examines the individual owner's choice of labor, the primary factor of production, and the cartel's choice of revenue sharing and salary cap policies in both a profit maximizing model and a utility maximizing model. The effect of decision making outcomes on labor market issues such as talent distribution and wages is explored. Cartel innovation and stability are discussed, especially the likelihood of adoption of institutional policies. The effect of the degree of the salary cap restriction (from unbinding to partially binding to completely binding) is examined. The optimal revenue sharing agreement and salary cap level are generally found to be 100% and 0%, respectively, from the owners' perspective. Wages are found to decrease with increases in revenue sharing and decreases in the salary cap level.

Abstract:
Major League Soccer (MLS) began with ten teams in 1996, and plans to expand to twenty teams. Where should those teams be located? A probit analysis is used to create a forecast of likely successful locations for MLS teams. The results indicate that the ten current MLS franchises are located in the top thirteen markets, as predicted by the model. Importantly, the two teams that were contracted by MLS are predicted to have a very difficult time supporting a franchise. The model also shows that two cities currently without franchises, Minneapolis and Philadelphia, could sufficiently support a team.

Location, Major League Soccer, Regression, Expansion

Abstract:
Sport teams have historically been reluctant to change ticket prices during the season. Recently, however, numerous sport organizations have implemented variable ticket pricing in an effort to maximize revenues. In Major League Baseball, variable pricing results in ticket price increases or decreases depending on factors such as quality of the opponent, day of the week, month of the year, and for special events such as opening day, Memorial Day and Independence Day (July 4). Using censored regression and elasticity analysis, this paper demonstrates that variable pricing would have yielded approximately $590,000 per year in additional ticket revenue for each Major League team in 1996, ceteris paribus. Accounting for capacity constraints, this amounts to only about a 2.8% increase above what occurs when prices are not varied. For the 1996 season, the largest revenue gain would have been the Cleveland Indians, who would have generated an extra $1.4 million in revenue. The largest percentage revenue gain would have been the San Francisco Giants. The Giants would have seen an estimated 6.7% increase in revenue had they used optimal variable pricing.

Ticket Pricing, Baseball, Sports Economics

Abstract:
A primary objective of sport marketers in the professional sport setting is to develop strategies to increase game attendance. Historically, one of the strategies to accomplish this goal has been the utilization of special promotions. This paper studied the impact of promotions on attendance at professional sport games. Specifically, this research examines (1) the overall effect of promotions on attendance, and (2) the marginal impact on attendance of additional promotional days. Using a data set containing 1500 observations, we find that a promotion increases single game attendance by about 14%. Additionally, increasing the number of promotions has a negative effect on the marginal impact of each promotion. The loss from this watering down effect, however, is outweighed by the gain from having an extra promotion day.

Major League Baseball, Promotions, Attendance, Demand, Regression

Abstract:
An examination of possible expansion or relocation sites for the NBA is undertaken using a two-equation system requiring two-stage probit least squares to estimate. The location model forecasts the best cities for an NBA team based on the underlying characteristics of current NBA teams. The results suggest that Louisville, San Diego, Baltimore, St. Louis, and Norfolk appear to be the most promising candidates for relocation or expansion.

Location, National Basketball Association, Regression, Expansion

Abstract:
The opening of the Palace of Auburn Hills, the SkyDome, and Oriole Park at Camden Yards led to the beginning of a construction boom in professional sport. In the National Football League (NFL) alone, 26 stadiums have been built or renovated in the past 10 years. Due to the additional revenue generated by these facilities and the NFL's current revenue sharing system, professional football franchises are building new stadia for economic reasons rather than to replace unusable or unsafe facilities. The purpose of this study was to determine if a significant difference in net revenue change existed for NFL teams that moved into a new facility and to determine if there was a significant change in valuation for these franchises. The findings indicated that new stadia significantly increase revenue and franchise value in the NFL; therefore, the primary goal of every firm, wealth maximization, is met for teams after opening a new facility.

Public Finance, Stadiums, National Football League, Revenue

Abstract:
During the past decade there has been a proliferation of sports stadia being built in America's municipal districts. While it used to be common for the public to fully fund stadium construction projects, over the past twenty years factors such as political motives, tax reform and increased public awareness of tax equity have forced sports teams to share increasing amounts of the financial burden (Crompton, Howard, & Var, 2003). As public funding for stadia construction has decreased, franchises have continued to strive for maximized profits. Concurrently, the cost of attending events in sports stadia has increased for consumers in terms of higher ticket prices even though changes in fixed costs should not affect pricing (Leeds & von Allmen, 2004).

The purpose of this study was to examine the relationship between the use of public funds to build stadia and the profit maximizing goals of National Football League (NFL) franchises. A hypothesis was formulated that stated the impact of the public share of the construction cost would have no effect on relative ticket prices for those that consume the product. The cross-sectional data for a ticket price model, which consisted of seasonal data from every NFL team to play from 1991 through 2003, was investigated. The results showed an increase in public funding by 10% lowers ticket prices by 42 cents. As shown, the bulk of the variation in ticket prices was due to a general increase over time and MSA per capita income.

Sports Finance, Ticket Prices, Public Finance, Stadiums, National Football League

Abstract:
The purpose of this paper is threefold. First, it is a complement to the many wage discrimination studies by examining exit discrimination in the NBA using a decade's worth of data (the 1980's). White players have a 36% lower risk of being cut than black players, ceteris paribus, translating into an expected career length of 7 seasons for an apparently similar player who is white, and 5.5 seasons for the same player who is black. Second, the career earnings effect of exit discrimination in the 1980's is larger ($577,000) than the career earnings effect of wage discrimination ($329,000). Third, consistent with much of the previous literature, customer racial discrimination appears to explain more of the observed exit discrimination than employer discrimination.

Abstract:
The NCAA and its member schools are a joint venture that fixes the compensation of its most important workers, the athletes, at a level that is substantially below what would otherwise occur in a competitive market. Claims of amateurism and the need for competitive balance obscure the more than $3.5 billion dollars in revenue generated mostly on the backs of those athletes. From the point of view of rule of reason antitrust analysis, the NCAA's justification for its concerted wage fixing has obvious weaknesses. Recent phenomenal growth in revenue has made the claims of the necessity and reasonableness of concerted action to restrain wages increasingly dubious.

NCAA, college sports, amateurism, antitrust, cartel, price fixing

Abstract:
Unlike most businesses or cartels, firms in a sports league need viable competitors. While a certain amount of domination is optimal, from an individual owner's perspective, too much will result in league dissolution, and thus a lower utility for every owner. Hence, there is a limited positive production network externality. This paper examines the optimal level of the externality in professional baseball using data from each game of the 1996 MLB season. Both absolute and relative quality are important determinants of the demand for sports contests. In fact, fans prefer a game in which two high quality teams are competing, but the home team has approximately twice as good of a chance as the visiting team of winning.

Baseball, Attendance, Competition, Censored Regression

Abstract:
The purpose of this paper is threefold. First, it complements the many wage discrimination studies by examining exit discrimination in the NBA using a decade's worth of data (the 1980's). White players have a 36 percent lower risk of being cut than black players, ceteris paribus, translating into an expected career length of 7.5 seasons for an apparently similar player who is white, and 5.5 seasons for the same player who is black. Second, the career earnings effect of exit discrimination in the 1980's is larger ($808,000) than the career earnings effect of wage discrimination ($329,000). Third, our data are consistent with the hypothesis that customer racial discrimination is the reason for the observed exit discrimination.