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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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25831.

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Date of creation: 2006
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Handle: RePEc:pra:mprapa:25831

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Keywords: sunk costs; stadium; financing; public finance; football; ticket prices; fixed costs;

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References

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  1. 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.
  2. Rodney Fort, 2004. "Subsidies as incentive mechanisms in sports," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 95-102.
  3. 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.
  4. 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. Pelnar, Gregory, 2009. "Competition and Cooperation between Professional Sports Franchises: The Impact on Ticket Prices," MPRA Paper 17787, University Library of Munich, Germany.

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