Thursday, October 08, 2009
Fans as Inputs, An Apparently On-Going Series
In an earlier post I mentioned that there aren't too many treatments in the formal sports economics literature that examine fans as inputs. One notable exception is that from David Boyd and Laura Boyd that appeared in the Journal of Economics and Finance in 1998 (issue 2/3 pp 169 - 179). They develop a model where fans are an input in winning and they use it to give an explanation as to why the common finding of inelastic ticket pricing is not inconsistent with profit maximization.
Here's the conclusion to their article.
There are other reasons which were put forth by previous researchers (and mentioned by Boyd and Boyd) as well as others since this paper was published in 1998, but I won't go into them here. Here is the other part to this little series of posts.
Thank's to commenter Peter G. for his Super Bowl comment that spurred me to remember the Boyd and Boyd paper.
Here's the conclusion to their article.
Increasingly, economists are utilizing standard microeconomic analysis in an attempt to better understand the world of professional sports. However, since most of microeconomic theory is based on profit-maximizing behavior, the assumption of profit maximization in the sporting world must first be justified before microeconomists can legitimately apply their tools. In this paper, we have shown that some existing empirical evidence regarding the elasticity of demand for tickets to professional sporting events which, on the surface, seems to raise questions about profit-maximizing ticket pricing policy is not necessarily inconsistent with team profit maximization.We have offered here a theory of team sports ticket pricing, based on the home field advantage, which implies that the traditional price elasticity of demand, measuring the ceteris paribus effect of changing ticket prices on attendance, is less elastic than is the elasticity of demand relevant for team profit maximization. The results of the theoretical analysis generated the prediction that accounting for simultaneity between attendance and team performance would result in a more elastic point estimate of the elasticity of demand for tickets. This hypothesis was supported using data from professional baseball. Moreover, the model generated predictions about how traditional, ceteris paribus elasticities of demand for tickets are likely to vary across different professional team sports. Again, these predictions were consistent with the results of existing empirical work on professional baseball and basketball. Although the assumption of profit-maximization as applied to professional athletics is far from fully vindicated, the results of this work can certainly be used as one piece of evidence for those who continue to use microeconomic theory to better understand the world of professional sport.
Thank's to commenter Peter G. for his Super Bowl comment that spurred me to remember the Boyd and Boyd paper.
Labels: Elasticity of demand, fans as inputs, profit-maximization
More on Fans as Inputs
In the comments to my piece yesterday regarding fans as inputs, Rob MacDonald pointed out a study showing that home crowds can affect official decision making. Here's the link he posted to a paper by Mohr and Kelly (1998) if y'all don't want to go back to the comments there.
Lastly, as I was driving down to Columbia, Mo. for tonight's (very wet!) Missouri-Nebraska game, I picked up the Louisiana State University's Les Miles coach's show broadcast out of NOLA. LSU plays in arguably the biggest game of the week nationwide when they take on conference rival Florida. Not only are these teams ranked 1st (UF) and 4th (LSU) in the current Associated Press Poll, these two teams have won the last three BCS titles and 4 of the last 6. It won't be too hard for the LSU faithful to get up for this game. During his program, Coach Miles talked fondly about his home crowd and how they were going to play an integral part in his team's game.
Fans are an important part of the game. They are paying customers but they can also have an impact on the field, meaning that they are an input. But unlike the typical way we think of "workers" - people who have to be paid to offer their "labor", fans' "labor" is generated spontaneously once they are in the park.
Examined umpire allocations of rewards to (1) teams from the same state (instate) as the central umpires and (2) teams from other states (outstate) in 171 Australian rules football matches over a period of 4 yrs. Data were game statistics. For each game, the statistics included the final score, the number of free kicks awarded to each team, the location, the names of the field umpires, and the crowd size. The dependent variable was the number of free kicks received by each team in a match. The instate teams received significantly more free kicks than the outstate teams did in matches between them. The extent of the instate adjudication advantage varied by year; it was significantly greater for matches on an instate home ground than for matches on an outstate home ground. The umpires manifested ingroup favoritism in rewards of low value-salience (obstruction of outgroup scoring opportunities) rather than in rewards of high value-salience (facilitation of ingroup scoring opportunities). (PsycINFO Database Record (c) 2009 APA, all rights reserved)And here's a piece by Rob Simmons writing over at Dave Berri's fine Wages of Wins in which he describes research that he, David Forrest, and Babatunde Buraimo have done on the matter of referee bias. The kicker: it appears officials favor the home team, and the crowd may have an effect.
Intriguingly, for Germany, lenient treatment of home players is much less pronounced when the sample includes only matches at stadia where the field has a running track around it. This is suggestive that crowd influence on referees is reduced if the crowd is well back from the action. So our analysis suggests that referees can indeed be intimidated. And the level of intimidation is influenced by of all things, how the stadium is constructed.Yes, Virginia, capital and labor are complements in production. And here's an earlier post in which I was writing about complementarity between players and facilities and didn't realize that I was writing about fans as an input as well (consider that an unintended assumption).
Lastly, as I was driving down to Columbia, Mo. for tonight's (very wet!) Missouri-Nebraska game, I picked up the Louisiana State University's Les Miles coach's show broadcast out of NOLA. LSU plays in arguably the biggest game of the week nationwide when they take on conference rival Florida. Not only are these teams ranked 1st (UF) and 4th (LSU) in the current Associated Press Poll, these two teams have won the last three BCS titles and 4 of the last 6. It won't be too hard for the LSU faithful to get up for this game. During his program, Coach Miles talked fondly about his home crowd and how they were going to play an integral part in his team's game.
Fans are an important part of the game. They are paying customers but they can also have an impact on the field, meaning that they are an input. But unlike the typical way we think of "workers" - people who have to be paid to offer their "labor", fans' "labor" is generated spontaneously once they are in the park.
Labels: fans as inputs
