Major League Baseball: Monopoly Pricing and Profit-Maximizing Behavior
AbstractThis 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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Bibliographic InfoArticle provided by in its journal Journal of Sports Economics.
Volume (Year): 2 (2001)
Issue (Month): 4 (November)
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Find related papers by JEL classification:
- L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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- Daniel, Rascher & Chad, McEvoy & Mark, Nagel & Matt, Brown, 2007. "Variable Ticket Pricing in Major League Baseball," MPRA Paper 25803, University Library of Munich, Germany.
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- 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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