About a week ago, I was listening to the Toronto Blue Jays’ broadcast of a game between the Blue Jays and the New York Yankees. Jerry, the primary announcer was telling the listeners that the Yankees infield had a collected salary of 65 gazillion dollars while the Blue Jays infield was paid collectively only 32 cents — Actually, I forget the exact numbers, but the ratio was roughly five or six to one.
He then proceeded to do the same thing with the outfield, the bench, the starters, and the bullpen. Given that the total payroll of the Yankees is about 5 or 6 times as large as the Blue Jays payroll, this wasn’t surprising.
When he finished, his sidekick, Warren, chimed in
Does that tell you anything about why tickets to Yankees games cost five times as much as they do anywhere else in the league?
No, Warren it doesn’t.
In simple terms, the supply curve for tickets to a game is vertical at stadium capacity. That means the equilibrium price of tickets is determined by the height of the demand curve and is not a result of the amount being paid to players. In fact, it is a causal factor in how much owners and G.M.s offer to pay players.
If the size of the payroll determined ticket prices, why don’t promoters hire the ten best volleyball players in the world, pay them $10m. each per season, and charge $75 per ticket to watch them play?
To my colleagues: I know, I know: a better explanation involves marginal revenue and marginal costs, along with marginal revenue product and marginal factor costs.