Sports Econ

With an Injury

10 % chance of getting hurt with median income of 45,000 .9(pro salary)+.1(median income) g=(senior year -freshman year)

25. What percentage of athletic department revenues is based on ticket sales alone?

25%

Radovich versus the Nfl

All pro lineman tried to enter nfl but was rejected blacklisted for playing in another league Nfl won 6-3 -No legal monopoly power -No legal monopsony power

16. Basic multiplier - no leakage - initial change, MPC - what's overall change?

Basic multiplier = 1/(1-mpc)

21. Babe Ruth - paid then vs. now - calculate how much they would be worth today using

CPI's $ in old money x new cpi/old cpi (Salary*(NewCP1)/old) 1930: Ruth earned $80,000 1930 CPI = 16.7 2008 CPI = 207.3 2008: (80,000)(207.3/16.7) = $993,053

20. Marginal propensity to import (MPI) - how to calculate change in imports/ change in income

Change in imports over change in income Multiplier= 1/(1-MPC+MPI)

Qualcomm Seat Guarantee

City receives 10% of ticket revenue City reimburses team 100% of value of unsold tickets Ex: $50 ticket Chargers receive $27 [=(50)(.90)(.60)] if sell ticket Chargers receive $50 if don't sell ticket

Craft vs. industrial union?

Craft: organized along skill lines to keep prices high they prevent non-members to practice the skill i.e. screen actors guild Industrial: came about to offset powers of large employers i.e. united auto workers → Craft unions affect pay because some restrict access to skills and jobs; they raise pay by restricting labor supply → Industrial unions affect pay because they push wages up via collective bargaining and the threat of a strike; reduce employment in the industry → Workers act like a monopoly

17. What is the Ramsey Rule?

Deals w/ taxation Inversely related to elasticity of demand, minimizes DWL Ramsey rule for efficient sales taxes: → An efficient tax minimizes deadweight loss → Thus, the tax is inversely related to the elasticity of demand

Federal League vs. NL 1922 - Baseball

Federal league tried to compete with NL and AL, they used the reserve clause to keep players from switching over to this new league. FL sued under the Sherman act. Final ruling in Supreme Court was that Sherman act did not apply to baseball because it is a public exhibition and not commerce. This ruling has not been used as precedent for other leagues and subsequent MLB decisions have been tortured by the logic in this case.

Why does the invariance principal hold for the reserve clause and the draft

Free agency allows a player to go to the team that offers the best employment terms → Regardless what system in place.. talent goes to highest bidder list 3 reasons that this principle holds for the reserve clause/draft choose 4th one = not one of those reasons aka false Reserve clause: part of a player contract that stated upon the contract's expiration, the rights to the player were to be retained by the team

10. MPC and leakage value - calculate the multiplier

Leakage refers to money spent that does not stay in the "local" economy 1/(1-mpc*f) where f is fraction of spending that does not leak away

13. Title IX requires schools demonstrate...?

Mandated equal access & opportunities for women in federally funded education programs Advantages ● Spurred rapid growth in women's sports ● Most of the growth was in the 1970s and 1980s ● Gave women grounds to seek remediation Disadvantages ● Many colleges have cut men's programs rather than expand women's programs ● As rewards to coaching have risen, women coaches have disappeared ● Fell from ~80% of coaches in women's sports to ~44%

5. What does the marginal product of labor and MRP tell you?

Marginal benefit of a unit of labor → The extra worker produces extra output: Q/L = MPL → The output can be sold for additional revenue: MR MRP is the firms demand for labor (MRP)=MR*MP(L) MR=Market Price MRP= P x Q/L Maximize Profits: w=MR*MP(L) MRP will generally slope down diminishing returns -> MP is negative function of L MR is either constant or decreasing in Q W = winning percent; both MP and MR depend on the team's current level of winning.

- Haywood vs NBA (1971)

NBA did not allow Spencer Haywood to realize an NBA contract because of the bylaw that said a player must be four years out of high school to play professionally. He sued claiming a ban on underclassman was an illegal group boycott in restraint of trade. The supreme court decision ruled that not allowing new high school graduates into the NBA hurt them by forbidding them to practice their trade, competition in the market he wishes to enter is hurt, and the individuals in the NBA have pooled their economic power effectively creating a private government. The ruling allowed players to enter NBA out of high school

What occurs when a negative vs. positive externality? - too much vs. too little

Negative: too much of something unwanted i.e pollution, smoking recipients of the externality are worse off without compensation sports facilities in a city can increase crime, noise and congestion Positive:

NCAA vs. Board of Regents of the Univ. of Oklahoma .....(1984)

OU's case NCAA suppressed competition in the CFB TV market TV exposure desired by schools, cut off by NCAA Threat of expulsion denied essential facility to compete NCAA Purpose was to protect live gate & promote competitive balance* Pro-competitive joint venture w/ no monopolistic intent Court & Appeals Court: OU is right on all counts contract was an illegal restraint of trade that limited viewing of games on TV; no evidence of pro-competitive effects Consequences 1. TV now under conference control [why is this ok?] 2. Q increased & price fell; revenues off by 1/3! Big 8 conference revenues increased significantly; OU's share fell

23. When does a stadium cause a city's net exports to rise?

Outsiders come into town and spend, locals spend more in town Local residents to spend more Increase overall spending Spend lImportocally rather than elsewhere "s" from other cities fall (causing imports to fall)

3. How does the exchange rate affect Canadian teams?

Paid in US dollars Revenue received in Canadian$ but salaries paid in US$, players in Canada relatively more expensive, and Canadian teams less competitive

Go pro or not?

Player should stay in school as long as g > r Player should turn pro when r > g Suppose a junior could earn a salary of $750,000 by declaring himself eligible for the draft. If he waits until his senior year he can make $900,000. If the interest rate is 4% should he stay the extra year? g= (senior year-What he makes declaring pro)/ what he makes declaring pro

7. Why wasn't the NFL PA (players association) able to overturn the Roselle rule?

Relatively short career in NFL -- lost income really hurt 2. Mentality a) Listen to coach -- follow orders b) Pampered athlete vs long apprenticeship in minors c) Hierarchy among players (Lords of the Realm, p.293) 3. Difference in leadership Teams had to compensate each other when signing a free agent → The rule turned signing a free agent into a trade → Free agency was not restored until 1992 The NFLPA disbanded This allowed individual players to sue the NFL on antitrust grounds

22. Why did the NFL PA disband in 1982?

So they could allow players to sue the NFL on antitrust grounds.

15. Joe Lewis/Oscar De La Hoya

Substitution vs. income effect Joe made much less... so why didn't he fight less? Financial trouble: couldn't afford much, including leisure → Less leisure means more labor → His labor supply curve shifted right ; supply curve sloped up

4. Given a time period, interest rate, and value/cost of stadium - how much annually must the city make just to break even?

Suppose a city issues 30-year bonds at 3.5% interest to pay for a $500M stadium a. It must make $27.2M/year to break even b. More generally P = V/{[1-(1+r)-t]/r} i. P = Required annual payment ii. V = Value of stadium iii. r = Interest rate iv. t = Term of loan

9. Why is there more competition for college broadcasts vs. pro sports? football?

There are multiple conferences battling for broadcast time. Unlike the pros, media providers may be able to retain some of the profits from college broadcasts ● Professional leagues sell their national TV contracts as a whole, not just by division. In college TV deals are sold by conference, and since some conferences are better than others, more competition to get the best.

14. Why is the legal term "student athlete"?

To get out of needing to pay their athletes workers compensation

19. What is a bilateral monopoly?

Union behaves as monopolist: Sets employment where MR = S Sets wage off D curve WU, LU Employer behaves as monopsonist: Sets employment where D = ME Sets wage off S curve WM, LM Wage falls in between Precisely where depends on bargaining power This depends in part on effectiveness of strikes WU - WM = Range of Indeterminacy

24. What is statistical discrimination?

Using group statistics to judge individual performance; the group does not necessarily reflect the individual, group stats used when individual info is costly

why do most economists view the lottery as a way to increase tax revenue?

Voluntary, played by poor and dumb, inefficient: state run, 2/3 of revenue go to the lottery mechanism

11. Perfect competition vs. monopsony

Who pays less hire less? Monopsony Pays more hires more? Monopsony

12. Roger Clemens makes X per year w/o revenue-sharing. When #team and %revenue sharing - what is hit total pay?

c. Yank's net MRP after revenues sharing: i. $10m*(0.5) + $10m*(0.5)*(1/N) ii. with N = 30, Yankees Net MRP falls to $5.167m iii. Result: Clemens' W falls to ~+$5.167m salary(revenue sharing) +Salary(revenuesharing)*(1/number of teams)

6. Which league pays their players the lowest portion of their MRP ~15%?

the nfl