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Subsidized monopolists and product prices: the case of Major League Baseball

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  • Phillip Miller

Abstract

I analyse the setting of ticket prices when teams receive subsidization. I model teams as entertainment providers, where entertainment is generated by selling wins and amenities. I argue that subsidization of teams generally comes from subsidizing the amenities in the teams' stadiums. Subsidization lowers the marginal cost of providing them to fans, driving ticket prices lower. The empirical analysis suggests that this is the case. The average team playing in a 5-year-old public stadium charges a ticket price that is 40 cents less than the same team playing in a private stadium of the same age.

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  • 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.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:25:p:3249-3255
    DOI: 10.1080/00036840802360203
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    References listed on IDEAS

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    1. Bruce K. Johnson & Peter A. Groothuis & John C. Whitehead, 2000. "“The Value of Public Goods Generated by a Major League Sports Team: The CVM Approach,”," Working Papers 0014, East Carolina University, Department of Economics.
    2. 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.
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    4. Bruce K. Johnson & Peter A. Groothuis & John C. Whitehead, 2001. "The Value of Public Goods Generated by a Major League Sports Team," Journal of Sports Economics, , vol. 2(1), pages 6-21, February.
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    6. Donald L. Alexander, 2001. "Major League Baseball," Journal of Sports Economics, , vol. 2(4), pages 341-355, November.
    7. Rodney Fort, 2006. "Inelastic Sports Pricing at the Gate? A Survey," Chapters, in: Wladimir Andreff & Stefan Szymanski (ed.), Handbook on the Economics of Sport, chapter 77, Edward Elgar Publishing.
    8. Coates, Dennis & Humphreys, Brad R., 2003. "The effect of professional sports on earnings and employment in the services and retail sectors in US cities," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 175-198, March.
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    Cited by:

    1. Yizhaq Minchuk & Aner Sela, 2021. "Subsidy and Taxation in All-Pay Auctions under Incomplete," Working Papers 2104, Ben-Gurion University of the Negev, Department of Economics.
    2. Geoffrey Propheter, 2017. "Subsidies and Stadia’ Opulence," Journal of Sports Economics, , vol. 18(1), pages 3-18, January.
    3. Minchuk, Yizhaq & Sela, Aner, 2023. "Subsidy and taxation in all-pay auctions under incomplete information," Games and Economic Behavior, Elsevier, vol. 140(C), pages 99-114.

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