A Quality-of-Play Model of a Professional Sports League
Assuming that consumers value both the absolute and relative quality of play, I compare the choice of ticket prices, team qualities, and number of games played in a noncooperative outcome versus that chosen by a social planner. I find that the nature of consumer preferences regarding the quality of play determines whether the demand for talented players are strategic complements or substitutes. A strong preference by fans for a superior team makes players strategic substitutes, and a concern for a high quality of play and competitive balance make players strategic complements. Moreover, when fans only value the relative quality of play, there is an overemployment of talented players in the noncooperative outcome versus the socially optimal outcome; when they only value the absolute quality of play then there is an underemployment of talented players in the noncooperative outcome. Copyright 2001 by Oxford University Press.
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Volume (Year): 39 (2001)
Issue (Month): 3 (July)
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- Ferguson, D G, , et al, 1991. "The Pricing of Sports Events: Do Teams Maximize Profit?," Journal of Industrial Economics, Wiley Blackwell, vol. 39(3), pages 297-310, March.
- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
- Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-14, May.
- Scully, Gerald W., 1995. "The Market Structure of Sports," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226743950.
- Whitney, James D, 1993. "Bidding Till Bankrupt: Destructive Competition in Professional Team Sports," Economic Inquiry, Western Economic Association International, vol. 31(1), pages 100-115, January.
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