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The use of Public Funds for Private Benefit: An Examination of the Relationship between Public Stadium Funding and Ticket Prices in the National Football League

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  • Matt, Brown
  • Daniel, Rascher
  • Wesley, Ward

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.

Suggested Citation

  • Matt, Brown & Daniel, Rascher & Wesley, Ward, 2006. "The use of Public Funds for Private Benefit: An Examination of the Relationship between Public Stadium Funding and Ticket Prices in the National Football League," MPRA Paper 25831, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25831
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    References listed on IDEAS

    as
    1. Chad D. McEvoy & Mark S. Nagel & Timothy D. DeSchriver & Matthew T. Brown, 2005. "Facility Age and Attendance in Major League Baseball," Sport Management Review, Taylor & Francis Journals, vol. 8(1), pages 19-41, January.
    2. McDonald, Mark & Rascher, Daniel, 2000. "Does Bat Day Make Cents? The Effect of Promotions on the Demand for Major League Baseball," MPRA Paper 25739, University Library of Munich, Germany.
    3. Rodney Fort, 2004. "Inelastic sports pricing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 87-94.
    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. Rodney Fort, 2004. "Subsidies as incentive mechanisms in sports," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 95-102.
    6. Brown, Matthew & Nagel, Mark & McEvoy, Chad & Rascher, Daniel, 2004. "Revenue and Wealth Maximization in the National Football League: The Impact of Stadia," MPRA Paper 25741, University Library of Munich, Germany.
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    Cited by:

    1. Vörös, Tünde, 2017. "Költség-haszon elemzési keretrendszer sportberuházások társadalmi-gazdasági értékeléséhez [An economic framework for cost-benefit analysis of sports facilities]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 394-420.
    2. Pelnar, Gregory, 2009. "Competition and Cooperation between Professional Sports Franchises: The Impact on Ticket Prices," MPRA Paper 17787, University Library of Munich, Germany.
    3. Geoffrey Propheter, 2017. "Subsidies and Stadia’ Opulence," Journal of Sports Economics, , vol. 18(1), pages 3-18, January.

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    More about this item

    Keywords

    sunk costs; stadium; financing; public finance; football; ticket prices; fixed costs;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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