The Economics of Sports by Michael A. Leeds, Michael A. Leeds, Peter von Allmen

Preface     xiii
Introduction and Review of Economic Concepts     1
Introduction     3
Three Major Areas of Economics Explored     6
The Role of Models     7
Positive Versus Normative Economics     8
Biographies     9
Sports History and Balance of Coverage     9
The Organization of the Text     10
Additional Support and Sources     11
Review of the Economist's Arsenal     13
Introduction     13
Opportunity Cost and Comparative Advantage     14
A Reintroduction to Supply and Demand     15
Demand, Supply, and Equilibrium     16
Supply and Demand Curves and the Price of Baseball Cards     19
Price Ceilings and the Benefits of Scalping     27
Market Structures: From Perfect Competition to Monopoly     28
A Note on the Definition of Output     28
Perfect Competition     29
Monopoly and Other Imperfectly Competitive Market Structures     31
Applying the Models: Evaluating an Increase in Costs     35
The Development of Professional Sports     37
Choices under Uncertainty     38
Biographical Sketch   SilvioBerlusconi     43
Summary     44
Discussion Questions     44
Problems     45
Utility Functions, Indifference Curves, and Budget Constraints     47
Constrained Maximization     47
Using Indifference Curves and Budget Constraints: The Rise of Soccer and Baseball     54
Regression Analysis in Brief     57
Multiple Regression and Dummy Variables     62
The Industrial Organization of Sports     65
Sports Franchises as Profit-Maximizing Firms     67
Introduction     67
The Importance of Leagues     68
Setting the Rules     69
Limiting Entry     71
Controlling Entry as Cooperative Behavior     75
League Contraction     76
Marketing     77
What Are Profits and How Are They Maximized?     79
A Detailed Look at Revenue     80
Gate Revenue     82
Television Revenue     85
The Effects of Revenue Sharing     92
Cost     94
Opportunity Cost-Teams on the Move     95
Taxes, Profit, Owner Behavior, and Vertical Integration     95
Turning Losses into Profits: The Accounting Game      99
Using Sports to Maximize Profits Elsewhere     99
Operating Income, Book Profit, and Bill Veeck     100
Soccer's Alternative Business Model     102
Profit Maximization in Soccer     103
The Impact of Promotion and Relegation     104
The Financial Dangers of an Open System     106
Soccer in America: The MLS and a Single-Entity League     107
Biographical Sketch   Bill Veeck     107
Summary     108
Discussion Questions     109
Problems     109
Monopoly and Antitrust     111
Introduction     111
What's Wrong with Monopoly?     112
Monopolists and Deadweight Loss     113
Promotion, Relegation, and Monopoly Power     115
Monopolists and Price Discrimination     116
Consumer Surplus and Personal Seat Licenses     119
Monopoly Stood on Its Head: A Brief Introduction to Monopsony     120
What's Right with Monopoly?     121
Barriers to Entry     124
Society's Response to Monopoly and Monopsony: Antitrust Laws     125
An Important Anomaly: Baseball's Antitrust Exemption     126
The Economic Impact of the Antitrust Exemption      131
Limited Exemptions: The NFL and Television     133
The NCAA: An Incidental Cartel     134
Prisoner's Dilemma: How Rational Actions Lead to Irrational Outcomes     137
Biographical Sketch   "Pete" Rozelle     140
Summary     142
Discussion Questions     142
Problems     143
An Alternative Application of Game Theory     144
Competitive Balance     147
The Fan's Perspective     148
The Owners' Perspective     151
The Effect of Market Size     152
How Competitive Balance can be Measured     154
Within-Season Variation     154
Between-Season Variation     158
Attempts to Alter Competitive Balance     160
Revenue Sharing     162
Salary Caps and Luxury Taxes     162
The Reverse-Order Entry Draft     163
Schedule Adjustments in the NFL     163
The Effects of Attempts to Alter Competitive Balance     164
The Coase Theorem and Competitive Balance     165
Salary Caps     166
The Draft     168
Revenue Sharing and Luxury Taxes     169
Promotion and Relegation      169
Biographical Sketch   Bud Selig     170
Summary     172
Discussion Questions     172
Problems     172
Two Additional Ways to Measure Competitive Balance: The Lorenz Curve and the Markov Chain Method     174
Public Finance and Sports     179
The Public Finance of Sports: The Market for Sports Franchises     181
Introduction: How Walter O'Malley Changed the Landscape of Sports     181
The Competition for Teams and the Value of a New Stadium     185
How Teams Exploit Market Forces     190
Leagues, Cities, and Monopoly Power     191
The All-Or-Nothing Demand Curve     193
The Winner's Curse     195
How the Olympics and the World Cup Induce Overspending     196
The Form and Function of Stadiums and Arenas     200
What's in a Name?     201
The Size and Shape of Facilities     202
Location, Location, Location     208
Biographical Sketch   Al Davis     211
Summary     212
Discussion Questions     213
Problems     213
The Costs and Benefits of a Franchise to a City     215
Introduction     215
Why Do Cities Do It? The Benefits of a Franchise     216
Privately Built Facilities     216
Is a Stadium a Worthwhile Investment for a City?     217
Why Governments Subsidize Sports Franchises     219
Multiplier Effects     227
Can Anyone Win at This Game?     231
The Impact of Special Events     234
A Public Choice Perspective     235
Financing Facilities     237
An Economic View of Taxes: Who Should Pay?     238
Sales Taxes     241
Incremental Financing     242
Taxes That Broaden the Burden     243
The Benefits of Debt     244
Biographical Sketch   "Mitt" Romney     246
Summary     247
Discussion Questions     247
Problems     248
The Labor Economics of Sports     249
An Introduction to Labor Markets in Professional Sports     251
Introduction     251
Overview of Labor Supply and Demand     252
Labor Supply     253
Labor Demand     255
Market Demand and Equilibrium     258
Imperfect Competition and the Demand for Labor     258
Human Capital Theory      259
Monopsony and Other Restrictions of Competitive Markets     262
Monopsony     262
The Reserve Clause     264
Free Agency     265
Final Offer Arbitration     266
Salary Caps     268
The Draft     270
Empirical Evidence on Restricted Player Movement and Player Salaries     271
The Impact of Rival Leagues     275
The Economics of Tournaments and Superstars     277
Evidence on the Potential Inefficiency of Tournaments     281
What Is a Gold Medal Worth?     285
An Exception to the Rule: NASCAR     285
The Distribution of Income     287
Biographical Sketch   Babe Didrikson Zaharias     290
Summary     292
Discussion Questions     292
Problems     293
The Labor-Leisure Choice Model of Indifference Curves     295
Labor Unions and Labor Relations     303
Introduction     303
A Brief Introduction to the Economics of Unions     304
An Overview of Strikes     308
Labor Conflict in Professional Sports     314
A Change of Pace: The 2002 Baseball Agreement     315
Thrown for a Loss: The NFLPA and Salaries in Professional Football     317
Reversal of Field: Recent Settlements in Basketball and Hockey     320
Professional Tennis Associations     324
Biographical Sketch   Marvin Miller     330
Summary     331
Discussion Questions     332
Problems     333
Discrimination     335
Introduction     335
Becker's Theory of Labor Discrimination     337
Different Forms of Discrimination in Professional Sports     339
Employer Discrimination     339
Does Anyone Win with Employer Discrimination?     344
Employee Discrimination     350
Consumer Discrimination     353
Discrimination by National Origin in European Soccer     355
Positional Discrimination or Hiring Discrimination     357
Gender Equity-A Special Case?     360
Title IX and Discrimination in College Sports     362
Biographical Sketch   Branch Rickey     364
Summary     366
Discussion Questions     366
Problems     366
Sports in the Not-for-Profit Sector     369
The Economics of Amateurism and College Sports      371
Introduction     371
The Troublesome Concept of Amateurism     373
A Brief History of Amateurism and "the Olympic Ideal"     373
Amateurism, Profits, and the NCAA     376
The Code of Amateurism: Academic Ideals or Monopsony Power?     377
Pay for Play: The Grant-in-Aid     381
What's in a Name? The Lot of the "Student-Athlete"     382
Measuring the Net Value of Athletes to Colleges     382
Dividing the Profits: The NCAA as an Efficient Cartel     383
College as an Investment for the Student-Athlete     387
The NCAA and the Uneasy Coexistence of Athletics and Academia     392
Why Schools Promote Big-Time Athletic Programs     394
The Difficulty in Regulating College Sports     397
The Knight Commission on Intercollegiate Athletics     398
Academic Standards: Bulwarks of Integrity or Barriers to Entry?     399
Academic Standards as a Barrier to Entry     403
The Finances of College Athletics     404
Do Colleges Make a Profit from Athletics?     404
College Athletics and Profit Maximization     407
Biographical Sketch   Anita Defrantz     409
Summary     410
Discussion Questions      410
Problems     411
Works Cited     413
Index     433