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Sports League Expansion and Economic Efficiency: Monopoly Can Enhance Consumer Welfare

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Author Info
Lawrence Kahn ()

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Abstract

This paper studies optimal sport league size. League expansion lowers average player quality, reducing fans' utility in inframarginal locations, while fan utility in new locations rises. Welfare analyses of such expansions must compare these two effects. Using a model where fan demand depends on average player quality and locality-specific factors, I find that under various pricing schemes, optimal league size is smaller than under free entry: the marginal team ignores its effects on inframarginal fans' utility. In some cases, the monopoly outcome is optimal, while in others the optimum league size is between the competitive and monopoly solutions.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1101.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1101

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Find related papers by JEL classification:
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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  1. John Siegfried & Andrew Zimbalist, 2000. "The Economics of Sports Facilities and Their Communities," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 95-114, Summer. [Downloadable!] (restricted)
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