# Project #34270 - Sports Economics

There are 2 assignments. I have attached a file from question 5 you need to do this also.

1st assignment

Sports Economics
Homework #1
1. (5 Points) A consulting firm estimates the demand by local businesses for
attendance at a pro sports team's games:
PB = \$140 – 4AB
where PB is the ticket price paid by businesses, measured in dollars, and AB is
their attendance measured in thousands of fans.
a. Draw this attendance demand function with the traditional P on the
vertical axis, and Q/A on the horizontal axis.
b. Using this demand function, find the total revenue function. What
is the shape of the total revenue function? What is the highest
possible total revenue that the team can hope to collect? At what
level of attendance? At what price?
c. Using this demand function and your answer to part (b), what is
the elasticity of demand at the revenue maximizing attendance
level (hint: if your calculations are correct, there is only one
answer you should get for this0?
25,000 seats, should the team owner fill the stands with business
2. (5 Points) The same consulting firm also estimates that the demand by families
for attendance at the same games and the same seat-types is as follows:
PF = \$80 – (2/3)AF
where PF is the price of a ticket for individual family members, measured in
dollars, and AF is the attendance by individual family members, measured in
thousands.
a. Explain, comparing the elasticity of demand found in 1C with that
found using the above equation, why individual family members
will be charged a different price than business buyers for the same
game and seat-type. What is the ratio of business buyer to family
member price (PB/PF) if the team owner cares about the bottom
line (you will need to calculate PF in much the same way as you
calculated PB in question 1. Is this price discrimination?
2a. What does this number represent?
3. (2.5 Points) The NFL’s Houston Oilers left Texas to become the “Tennessee
Oilers” for the 1997 season. They changed their name to the Tennessee Titans
and moved into their new Adelphia Stadium for the 1999 season. Interestingly,
their lowest-priced individual tickets were priced at \$12 while their lowest-priced
season ticket cost \$250. Given that there are only 8 home games, why didn’t fans
just buy individual tickets rather than season tickets? Is this price discrimination
or not? Explain.
4. (5 Points)
a. Using MLB ticket price (on blackboard) and attendance data (at
tml), produce a spreadsheet for the year 2001 with the following
columns: team name, attendance, and ticket price. Scale attendance in
100,000 for charting purposes. Sort the data by attendance in ascending
order. Produce a scatter chart with attendance on the x-axis and ticket
prices on the y-axis (include the scatter chart with your homework). Do
your results support or reject the theory of demand? Explain. What other
variables would you like to have to more accurately depict demand?
b. Using MLB ticket price and attendance data (from the same sources as
part a), produce a spreadsheet for the San Diego Padres, 1998-2003, with
the following columns: year, attendance, ticket price. Scale attendance in
100,000 for charting purposes. Sort the data by attendance in ascending
order. Produce a scatter chart with attendance on the x-axis and the two
ticket prices on the y-axis (include scatter chart with your homework). Do
your results support or reject the theory of demand? Explain. If you
include 2004 and 2005 to the 1998-2003 data does your answer change?
Why or why not?
5. (5 Points)
a. The Yankees typically dominate the top of the payroll distribution in
MLB, while the Expos/Nationals are usually towards the bottom. On
blackboard, I have given you two spreadsheets, one for each of these
teams, with the following columns: year, team payroll, ticket price, real
payrolls to \$millions for charting by dividing each payroll by
1,000,000. Sort the data by team payroll in ascending order, and for each
team, produce a separate scatter chart with team payroll on the x-axis and
ticket prices on the y-axis to include with your homework. For these
unadjusted dollar values, calculate the correlation coefficients between
payroll and ticket price for each of the three teams (in a blank cell type
=CORREL(__,__) where for each __ you select the column with payroll
and the column for ticket prices respectively).
b. Now sort the data by real team payroll in ascending order. For each team,
produce a separate scatter chart with real team payroll on the x-axis and
real ticket prices on the y-axis to include with your homework. Calculate
the correlation coefficients between real payroll and real ticket price for
each of the three teams.
c. What conclusions can you draw from this regarding the relationship
between payrolls and ticket prices? What would you say to the fan who
complains that ticket prices are too expensive because team payrolls are
out of control?
6. (2.5 Points) Consider Coke and Pepsi’s decision of whether to advertise during
the Super Bowl or not. If neither company advertises during the Super Bowl, the
two companies split the market and earn \$50 million each. If they both advertise,
they again split the market, but profits are lower by \$10 million since each
company must bear the cost of advertising. Yet if one company advertises while
the other does not, the one that advertises attracts customers from the other. In this
case, the company that advertises earns \$60 million while the company that does
not advertise earns only \$30 million. Given this information, what is each
company’s dominant strategy? What level of profits will following this strategy
lead to for both firms? Will both firms advertise or not? What would have to

2nd assignment

Franchise Analysis Description:
ï‚· The franchise analysis project will require you to pick one professional sports franchise. This franchise could be from any of the major sports,
ï‚· Your final paper will then be an economic analysis of this franchise including:
ï‚§ Section 1: An introduction covering your chosen franchise, perhaps a little history of the franchise and a preview of the rest of the paper
ï‚§ Section 2: The labor market and your franchise. This is where you talk about your franchise’s payroll over time, the composition of their payroll (balanced or unbalanced, etc), how they have chosen to structure player contracts (long term contracts, incentive laden contracts, etc), any discrimination issues, free agency issues, etc.
ï‚§ Section 3: Industrial Organization topics for your franchise. This is where you discuss their winning %s over time, the relations between winning and payroll for the franchise, ticket pricing, advertising, etc.
ï‚§ Section 4: The Government and your franchise. This is where you would discuss public funding for stadiums, taxes, subsidies, etc.
ï‚§ Section 5: The conclusion, where you sum up your findings, and discuss any potential issues on the horizon for your franchise.
o Each of the above sections should clearly address where the franchise has been on the issue historically, where it is currently and where it is headed. For example, in section 3 you may want to address the franchise’s payroll relative to its competition historically, currently and going forward.
o Note that the topics listed above are examples, and you should not use this as a checklist of things to cover.
o I would recommend graphs when applicable as a graph can convey a lot of information (for example plotting payroll over time is a far better way to get this information across than to take a page of discussion on the topic).

 Subject Business Due By (Pacific Time) 06/30/2014 05:00 pm
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