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Major League Baseball: Monopoly Pricing and Profit-Maximizing Behavior

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  • Donald L. Alexander

    (Western Michigan University)

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    Abstract

    This article presents evidence that team owners in Major League Baseball (MLB) set ticket prices as profit-maximizing monopolists. However, the evidence also indicates that the cost of other forms of entertainment affects the demand for baseball tickets as economic theory would predict. The interpretation is that team owners face negatively sloped demand curves for baseball tickets but they must compete for the consumer's entertainment dollar in a broader market for entertainment services. The recent change in MLB's territorial restrictions also had some impact on ticket pricing. The impact, however, is inconsistent with the hypothesis that it enhanced the team owners' market power. Instead, the evidence is consistent with the hypothesis that the change increased the demand for baseball tickets. One plausible explanation is that it provided greater incentive for individual team owners to promote their teams against other forms of entertainment. This argument merits additional consideration in future research and may provide some insight into how nonprice vertical restraints in other markets affect economic performance.

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    File URL: http://jse.sagepub.com/content/2/4/341.abstract
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    Bibliographic Info

    Article provided by in its journal Journal of Sports Economics.

    Volume (Year): 2 (2001)
    Issue (Month): 4 (November)
    Pages: 341-355

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    Handle: RePEc:sae:jospec:v:2:y:2001:i:4:p:341-355

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    Related research

    Keywords: Monopolists; Monopoly; Services;

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    Cited by:
    1. Paul Madden, 2008. "Price, quality and welfare consequences of alternative club objectives in a professional sport league," The School of Economics Discussion Paper Series 0802, Economics, The University of Manchester.
    2. Daniel, Rascher & Chad, McEvoy & Mark, Nagel & Matt, Brown, 2007. "Variable Ticket Pricing in Major League Baseball," MPRA Paper 25803, University Library of Munich, Germany.
    3. Katsushi Imai & Raghav Gaiha & Ganesh Thapa, 2008. "Food and oil prices," The School of Economics Discussion Paper Series 0801, Economics, The University of Manchester.
    4. McEvoy, Chad D. & Nagel, Mark S. & DeSchriver, Timothy D. & Brown, Matthew T., 2005. "Facility Age and Attendance in Major League Baseball," Sport Management Review, Elsevier, vol. 8(1), pages 19-41, May.
    5. Pedro Garcia-del-Barrio & Stefan Szymanski, 2009. "Goal! Profit Maximization Versus Win Maximization in Soccer," Review of Industrial Organization, Springer, vol. 34(1), pages 45-68, February.

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