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Endogeneity in Attendance Demand Models

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  • Roger Noll

    () (Stanford University)

Abstract

One of the most studied issues in the economics of sports is the nature of the demand for attendance at sporting events. With few exceptions, the standard result is that the coefficient on price in the attendance demand equation is either positive or, if negative, so small that at current prices demand is inelastic. Economists have then moved on to offering a variety of explanations for why this result may be valid, despite its inconsistency with theoretical explanations. This paper argues that the cause of price coefficients that are insufficiently negative is a specification error: the failure properly to identify the price equation in the supply and demand system. The main conclusion is that because all teams in a given sport face essentially the same marginal cost of attendance, the only circumstance in which price can be identified is one in which all or nearly all games are sellouts and teams play in stadiums of widely varying capacities. Because this condition is rarely satisfied, the best available econometric procedure is to impose a restriction on the price coefficient to the effect that the elasticity of demand is one minus the share of net revenues that are generated by in-stadium sources other than ticket sales (i.e., parking, concessions, advertising, programs).

Suggested Citation

  • Roger Noll, 2012. "Endogeneity in Attendance Demand Models," Discussion Papers 11-013, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:11-013
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    References listed on IDEAS

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    1. Jeffery Borland, 2003. "Demand for Sport," Oxford Review of Economic Policy, Oxford University Press, vol. 19(4), pages 478-502, Winter.
    2. David J. Berri & Martin B. Schmidt & Stacey L. Brook, 2004. "Stars at the Gate," Journal of Sports Economics, , vol. 5(1), pages 33-50, February.
    3. Rodney Fort, 2004. "Inelastic sports pricing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(2), pages 87-94.
    4. Dennis Coates & Brad R. Humphreys, 2007. "Ticket Prices, Concessions and Attendance at Professional Sporting Events," International Journal of Sport Finance, Fitness Information Technology, vol. 2(3), pages 161-170, August.
    5. Jones, J C H & Ferguson, D G, 1988. "Location and Survival in the National Hockey League," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 443-457, June.
    6. Guillermo Villa & Isabel Molina & Roland Fried, 2011. "Modeling attendance at Spanish professional football league," Journal of Applied Statistics, Taylor & Francis Journals, vol. 38(6), pages 1189-1206, April.
    7. John Goddard & Peter J. Sloane, 2005. "Economics of sport," Chapters,in: Economics Uncut, chapter 12 Edward Elgar Publishing.
    8. Jeffrey M. Wooldridge, 2001. "Applications of Generalized Method of Moments Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 87-100, Fall.
    9. 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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    Cited by:

    1. Raul Caruso & Marco Di Domizio, 2015. "La Serie A In Televisione E Allo Stadio: Presentazione Del Dataset Audiball 1.0," Rivista di Diritto ed Economia dello Sport, Centro di diritto e business dello Sport, vol. 11(1), pages 161-185, maggio.
    2. Mauricio Vaz Lobo Bittencourt & Leonardo Chaves Borges Cardoso & Elena Grace Irwin, 2016. "Biofuels Policies And Fuel Demand Elasticities In Brazil: An Iv Approach," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 181, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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