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Major League Baseball

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  • Donald L. Alexander

    (Western Michigan University)

Abstract

This 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.

Suggested Citation

  • Donald L. Alexander, 2001. "Major League Baseball," Journal of Sports Economics, , vol. 2(4), pages 341-355, November.
    • Handle: RePEc:sae:jospec:v:2:y:2001:i:4:p:341-355
    DOI: 10.1177/152700250100200403
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    References listed on IDEAS

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    1. B. Douglas Bernheim & Michael D. Whinston, 1998. "Exclusive Dealing," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 64-103, February.
    2. Alexander, Donald L. & Kern, William & Neill, Jon, 2000. "Valuing the Consumption Benefits from Professional Sports Franchises," Journal of Urban Economics, Elsevier, vol. 48(2), pages 321-337, September.
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    Cited by:

    1. Gerald T. Healy III & Jing Ru Tan & Peter F. Orazem, 2020. "Measuring Market Power in Professional Baseball, Basketball, Football, and Hockey," The American Economist, Sage Publications, vol. 65(2), pages 214-231, October.
    2. 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.
    3. James W. Meehan Jr. & Randy A. Nelson & Thomas V. Richardson, 2007. "Competitive Balance and Game Attendance in Major League Baseball," Journal of Sports Economics, , vol. 8(6), pages 563-580, December.
    4. Paul Madden, 2008. "Price, quality and welfare consequences of alternative club objectives in a professional sport league," Economics Discussion Paper Series 0802, Economics, The University of Manchester.
    5. Stefan Késenne, 2006. "The Win Maximization Model Reconsidered," Journal of Sports Economics, , vol. 7(4), pages 416-427, November.
    6. Donald L. Alexander & William Kern, 2004. "The Economic Determinants of Professional Sports Franchise Values," Journal of Sports Economics, , vol. 5(1), pages 51-66, February.
    7. Smith Erin E & Groetzinger Jon D., 2010. "Do Fans Matter? The Effect of Attendance on the Outcomes of Major League Baseball Games," Journal of Quantitative Analysis in Sports, De Gruyter, vol. 6(1), pages 1-24, January.
    8. Budzinski, Oliver & Feddersen, Arne, 2015. "Grundlagen der Sportnachfrage: Theorie und Empirie der Einflussfaktoren auf die Zuschauernachfrage," Ilmenau Economics Discussion Papers 94, Ilmenau University of Technology, Institute of Economics.
    9. Pedro Garcia-del-Barrio & Stefan Szymanski, 2009. "Goal! Profit Maximization Versus Win Maximization in Soccer," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(1), pages 45-68, February.
    10. Stefan Szymanski, 2010. "The Economic Design of Sporting Contests," Palgrave Macmillan Books, in: The Comparative Economics of Sport, chapter 1, pages 1-78, Palgrave Macmillan.
    11. Daniel, Rascher & Chad, McEvoy & Mark, Nagel & Matt, Brown, 2007. "Variable Ticket Pricing in Major League Baseball," MPRA Paper 25803, University Library of Munich, Germany.
    12. Aloys L. Prinz, 2019. "Indirect Evolution and Aggregate-Taking Behavior in a Football League: Utility Maximization, Profit Maximization, and Success," Games, MDPI, vol. 10(2), pages 1-12, May.
    13. Phillip Miller, 2009. "Subsidized monopolists and product prices: the case of Major League Baseball," Applied Economics, Taylor & Francis Journals, vol. 41(25), pages 3249-3255.

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