Peter Angelos is Upset

And it’s not about the Nationals. The Baltimore Orioles wanted Carlos Delgado, and they got in a bidding war with the Marlins for his services (bidding wars kick arse if you are the one being bidded over!) and lost. What does Peter Angelos have to say? Well, he thinks the market is flawed:

“The [Orioles’] offers, I thought, certainly were generous, and some might think beyond what they should have been,” Angelos said. “They’re trying to improve the club and demonstrate to fans that we’re doing everything we can to make the club competitive with Boston and New York, and we’re heading in that direction.

“But the market needs to be reassessed. The more millions that are squandered, the more fans will have to pay through increased ticket prices and concessions. Major League Baseball has to come to grips with the crisis it’s in.

“These salaries are beyond what 90 percent of the teams are able to pay. It’s a problem that has to be dealt with in the future.”

The market isn’t flawed, but Angelos’ argument is. High salaries don’t drive high ticket prices. High ticket prices drive high salaries. In other words, demand curves slope downward but they do shift out. If demand is elastic, ticket revenue will fall if ticket prices are increased. If demand is inelastic, ticket revenue will rise if ticket prices are increased. Many studies of the demand for baseball suggest that demand is inelastic around the ticket prices that are set.

But why don’t teams raise prices anyways in order to generate additional ticket revenue? Baseball teams sell multiple complementary products (games, concessions, parking). Team revenue generated at the home stadium is the sum of the ticket revenue and the revenues from sales of these complementary products. If ticket prices are increased and demand is inelastic, ticket revenue will increase but the revenues from the complementary products will fall, likely more than offsetting the ticket revenue increase. So why would a team raise salaries and then raise ticket prices?

So Angelos is upset. He now has another MLB team within 40 miles of his stadium. He didn’t get Delgado. On the bright side, he did get Sammy Sosa, the man who might just as well spell the word “team” as “tiem” since it has an I and a me.

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Author: Phil Miller

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