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Inelastic sports pricing

Author

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  • Rodney Fort

    (Department of Economics, Washington State University, Pullman, WA 99164-4741, USA)

Abstract

A recurrent finding in estimates of the gate demand for sports events is pricing in the inelastic portion of demand. With few exceptions, this finding has either been ignored or (rather poorly) explained away. In this paper, the recurrent outcome is detailed and the explanations given by past authors are discussed. Then, profit maximization theory is explored for its inelastic pricing implications. It ends up that the local TV revenue relationships between MLB teams satisfy the situation that theory predicts would generate inelastic gate pricing. This suggests two things. First, inelastic pricing is consistent with profit maximizing team behavior. Second, fuller specification of revenue functions will enhance future work in the area. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Rodney Fort, 2004. "Inelastic sports pricing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 87-94.
  • Handle: RePEc:wly:mgtdec:v:25:y:2004:i:2:p:87-94
    DOI: 10.1002/mde.1108
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    File URL: http://hdl.handle.net/10.1002/mde.1108
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    References listed on IDEAS

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    1. Thomas H. Bruggink, 1993. "National Pastime to Dismal Science: Using Baseball to Illustrate Economic Principles," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 275-294, Summer.
    2. Stefan Kesenne, 2000. "Revenue Sharing and Competitive Balance in Professional Team Sports," Journal of Sports Economics, , vol. 1(1), pages 56-65, February.
    3. Sloane, Peter J, 1971. "The Economics of Professional Football: The Football Club as a Utility Maximiser," Scottish Journal of Political Economy, Scottish Economic Society, vol. 18(2), pages 121-146, June.
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    Citations

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    Cited by:

    1. Dong C. Won & Young H. Lee, 2008. "Optimal dynamic pricing for sports games with habitual attendance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 639-655.
    2. Roger G. Noll, 2013. "Endogeneity in attendance demand models," Chapters,in: The Econometrics of Sport, chapter 7, pages 117-134 Edward Elgar Publishing.
    3. Young Hoon Lee, 2013. "Estimation of temporal variations in fan loyalty: application of multi-factor models," Chapters,in: The Econometrics of Sport, chapter 8, pages 135-153 Edward Elgar Publishing.
    4. Brad R. Humphreys & Victor Matheson, 2008. "PILOTs and Public Policy: Steering through the Economic Ramifications," Working Papers 0832, International Association of Sports Economists;North American Association of Sports Economists.
    5. Trenton Smith & Young H. Lee, 2006. "Why are Americans Addicted to Baseball? An Empirical Analysis of Fandom in Korea and the U.S," Working Papers 2006-05, School of Economic Sciences, Washington State University.
    6. Paul Madden, 2008. "Price, quality and welfare consequences of alternative club objectives in a professional sport league," The School of Economics Discussion Paper Series 0802, Economics, The University of Manchester.
    7. Ricard Gil & Wesley Hartmann, 2007. "The Role and Determinants of Concession Sales in Movie Theaters: Evidence from the Spanish Exhibition Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 30(4), pages 325-347, June.
    8. Andersen, Per & Nielsen, Martin, 2013. "Inelastic sports pricing and risk," Economics Letters, Elsevier, vol. 118(2), pages 262-264.
    9. Rodney Fort, 2004. "Subsidies as incentive mechanisms in sports," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 95-102.
    10. Daniel, Rascher & Chad, McEvoy & Mark, Nagel & Matt, Brown, 2007. "Variable Ticket Pricing in Major League Baseball," MPRA Paper 25803, University Library of Munich, Germany.
    11. Madden, Paul, 2012. "Fan welfare maximization as a club objective in a professional sports league," European Economic Review, Elsevier, vol. 56(3), pages 560-578.
    12. Humphreys, Brad R. & Soebbing, Brian P., 2012. "A test of monopoly price dispersion under demand uncertainty," Economics Letters, Elsevier, vol. 114(3), pages 304-307.
    13. Tim Dittmer & Bob Carbaugh, 2014. "Major League Baseball: Dynamic Ticket Pricing and Measurement Costs," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 14(1), pages 44-57, Fall.

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