The Sports Economist

Despite an economy as shaky as a rookie pitcher's first big-league outing, Cactus League baseball fans are showing up in Arizona on a record pace.

At the season's midpoint, about 550,000 fans have attended 92 games, up nearly 2 percent from the same time last year, said J.P. de la Montaigne, president of the Cactus League Association.

Through 173 games, following the slate of 10 games on Sunday, March 16, the attendance total stands at 1,036,797.

As of yesterday, 42 of the 50 luxury suites in the new Yankee Stadium have been sold, at up to $800,000 each. Sixty percent of the park, or more than 30,000 seats, are classified as "premium" seats, priced between $250 and $1,000 each, and right now you couldn't buy one if you knew the mayor.

Labels: attendance, baseball, ticket demand

This season, Cactus League visitors are on track to eclipse the more than 1.27 million record fans in 2005, said Robert Brinton, Cactus League Association vice president.

He said that sports-related tourism seems more resistant to the ebbs of flows of the economy than other travel.

An increase in more locals attending games could also account for the strong turnout through the first half of the Cactus League.

The Chicago Cubs in Mesa, the perennial Cactus League leader at the box office, could set a record for average attendance, Brinton said.

The Cubs have drawn almost 11,000 fans per game the past two seasons.

Labels: attendance, baseball

It's getting to be arbitration time in baseball. Each year a set of players and teams negotiate under the threat that a third party (a panel of three arbitrators) will render a decision on the player's salary if a negotiated settlement cannot be reached. Even though a given case is not likely to make it all the way to the arbitration panel, the threat of arbitration drives a given player and his team, when they negotiate, to consider what the panel may decide.

Arbitration, first offered to the players by the teams back in the early 1970's as a way of appeasing the union in its calls for free agency, has never been popular with teams. This article by Fred Claire at MLB.com partly explains why.

One reason it is unpopular is because of the nature of the hearing process. For the players, they try to maximize their value to their team in the eyes of the arbitration panel: a sort of "how great I art" argument. For the teams, they try to minimize the player's value: basically arguing "how great thou aren't." This is contentious.

Another reason is that simply by becoming eligible for arbitration, players see a jump in their salaries and teams are bound to accept these salaries.

Here's what Bud Selig (in 1992 PM) had to say when asked by the New York Times about the economics of baseball: "In the last 15 to 18 months, talking to every club, asking 'What do you hate most about the system?' The bottom line is if they had their choice, without a doubt, it's salary arbitration. Free agency at least you can elect to do, but in salary arbitration you're somewhat of a prisoner of what other people have done."

Claire points to the tie between the arbitration system and free agency as one of the problems.

Baseball's labor market consists of three tiers of players: 1. reserved players who have less than three years of service* are, basically, the property of their teams; 2. arbitration-eligibles - players who have at least three years of service are also the property of their teams. But they can have their salaries determined through arbitration; 3. free agents, players who are not the property of their teams and are free to sign with whoever wants to sign them.

The collective bargaining agreement (CBA) restricts what arbitration panels can consider when rendering decisions (Article VI, Section F). Among those considerations are what comparable baseball players have earned as salaries. Because some free agents are comparable to arbitration-eligibles, their salaries, somewhat filtered down and averaged out, become part of the consideration (Dan Marburger's 2004 Economic Inquiry paper on arbitrator compromise provides econometric evidence of this). That's one reason why players see a jump in their salaries when they first become eligible.

But reading the article, the rhetoric and one-sidedness reminded me that this article comes from MLB.com, the official site of MLB and, therefore, a mouthpiece of the teams. So Claire doesn't discuss another reason for why the average player sees a nice raise just for becoming eligible: reserved players are in a monopsonistic labor market and, thus, earn salaries below their marginal values to their respective teams.

You can argue that part of the difference between salaries and marginal value can be considered a return on investment in minor league training. You can also argue that part of the difference goes to pure monopsony rent. The point is that reserved players are paid less than their marginal value and arbitrated players are paid closer to their marginal value because arbitration mimics, albeit imperfectly, a competitive labor market. Thus the jump in salaries by becoming eligible.

Labels: arbitration, baseball, labor markets, monopsony

When I called Miller at his Upper West Side apartment in New York on Monday night, he wasn't seething about the Hall of Fame vote. He was listening to the soundtrack of "Guys and Dolls" and letting his wife, Terry, handle the seething. But he, too, had a sense of deja vu.

"They seem to be the same kind of small-minded, vicious people as the owners were when I came in," he told me, though, ever the cool, rational man, he wasn't taking it personally.

"I'm only mad at myself," he said. "After the first time on the ballot, I should have just withdrawn my name from consideration. My judgment of my chances was, 'Never.'"

But Terry Miller and others talked him out of it. That first time, he drew 44 percent of the votes. And, indeed, he climbed to 63 percent the next time around, just 10 votes shy of what he needed for the 75 percent that would get him in.

Kuhn [MLB's commissioner and Miller's foil in the 1970s] made it onto only 17 percent of the ballots in the last round of voting conducted under the old process earlier this year.

Then the Hall of Fame changed the format. Instead of allowing all Hall of Famers to vote for "veterans" nominees, it created three new panels. Nominees in the "executive/pioneer" category were no longer being considered by 81 voters, but by 12, and that group is comprised primarily of former MLB executives.

Voila!Kuhn, a longtime Hall of Fame board member, got 10 votes. Miller got three.

Vladimir Putin couldn't have done it better; Cooperstown couldn't look worse.

Labels: baseball, labor, MLB

Labels: baseball

Reno: You attribute African-Americans’ fading interest in baseball to a number of economic and cultural factors, which you refer to as the Three C's: cost, continuity and competition. Can you briefly explain that?

Winfield: There are scores of reasons why African-Americans have set the sport aside to a large extent—and I’m talking about fans as well as players. But most of these reasons fall under these three categories. I’ll start with competition. When I grew up, baseball was No. 1. There was a glove in everyone’s crib. No one thought football would have such a huge impact on society. Young people didn’t aspire to be NBA players when [Bob] Cousy and [Bill] Russell were winning championships. These sports have done a good job marketing players and their sport. As for cost, baseball was free when I was a kid—in every park and “rec,” every school system. Now it costs money. And to be good at it, parents have to pay for training, for travel, etc. Can a single parent in an urban setting on a fixed income pay for that? No. And then there’s continuity. Used to be, baseball was a constant from age 8 to 18. There’s a disconnect now in the neighborhoods.

Baseball used to be like a vast ocean, it was broad, deep and connected to everything. Today it isn’t like that. There are many big lakes, rivers, tributaries, ponds, streams, you name it, but it’s not all connected. But if you go to a Southeastern Conference baseball game, look at the ballpark, look at the enthusiasm, Go to Omaha and check out the College World Series. Go to Williamsport for the Little League World Series. There are a lot of places where baseball is still very strong, in big cities and small towns.

Labels: baseball, race

Safeco Field opened in 1999 with 67 luxury suites and subsequently added another suite on the press-box level. For the first few years, 98 to 99 percent of the suites were filled, said Aylward. He said last year's percentage was in the mid- to upper-80s.

Aylward then talked to someone with the Detroit Tigers who mentioned the team's success with a new type of premium seating.

"We started talking about how they had discovered a new niche market that people really seemed to spark to," Aylward said.

The 140 seats in the All-Star Club will sell for $100-$125. Tickets are sold in packages of 10, 20, 40 and 81 games. Single-game suites, which include 16 seats, range from $2,400 to $4,000.

The All-Star Club came out of a realization that there was a consumer need that was not being met.

"There is this bucket of people out there that we didn't have a product to offer," Aylward said. "So any business is going to sit there and say, 'Let's create something for them.' "

The All-Star Club has three rows of assigned seating in an open-air terrace and then an indoor dining area and complimentary buffet. Beer, wine and spirits will be sold at a cash bar. Plasma televisions will be located throughout the indoor dining area.

Labels: baseball, luxury boxes

With pitchers and catchers reporting to the grapefruit and cactus leagues this week, it's time for baseball fans to dust off the equipment they, too, need for the 2007 season. I am referring, of course, to calculators, statistics, economics and multiple regression analysis, which calculates how much one factor (such as market size) contributes to some outcome (team wins).

In the hands of Prof. Bradbury, of Kennesaw State University, Georgia, these techniques lead to counterintuitive results sure to spark a bar fight or two. His coming book "The Baseball Economist: The Real Game Exposed," takes aim at all sorts of baseball lore to separate fact from myth.

Labels: baseball, economic analysis of baseball