Econ 366 (Economics of Sports) Final Exam Questions
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Oakland's strategy - ✔✔Minimize payroll required to build a team that could successfully
compete for a playoff spot. Have a decrease in salary and increase in win percentage.
Is player skill fixed? - ✔✔No, the A's signed cheap players but also made coaching decisions
to target specific skills. They showed players that they valued those skills and would reward
them for those skills.
Closing thoughts on moneyball - ✔✔Analysis supports that baseballs labor market was
inefficient at the turn of the 21st century. Changed very quickly after moneyball came out.
Rent seeking - ✔✔Manipulating public policy or economic conditions to increase profit
Do monopolies always charge monopoly prices? - ✔✔MC is never less than zero. MR = 0 is at
the level of output where price elasticity of demand is -1.
Elasticity of demand - ✔✔The quantity of the receptiveness of the demand for a commodity
to change in its price.
Change in percent of quantity of demand/change in percent of price. Is between -1 and 0.
Are monopolists setting prices too low and not maximizing profit? - ✔✔No because firms can
also raise profits from the sale of other items like concessions. But only if fans are in the
stadium! They're complements.
,Pricing Strategies in the NFL - ✔✔Fixed number of games, stadium with fixed # of seats. New
teams cannot enter to satisfy additional demand. Existing teams respond to higher demand by
raising prices.
Don't charge one price all season when some games are more popular than others.
Variable Ticket Pricing (VTP) - ✔✔sets ticket prices according to expected demand for a
future game
Dynamic Ticket Pricing (DTP) - ✔✔Adjusting ticket price as demand for a particular game
rises or falls (based on characteristics unknown at the beginning of the season)
Bundling - ✔✔requiring a consumer who wants to buy one good (Good A) to purchase one
or more additional goods (EXA: season tickets)
often brings in more money for firms
Price discrimination - ✔✔charging different consumers different prices based on their
willingness to pay
Perfect Price Discrimination (1st degree) - ✔✔Charging each consumer exactly what they're
willing to pay
Best you can do; producing max amount of surplus (for producers, none for consumers)
2nd degree Price Discrimination - ✔✔Allows fans to choose the price-quantity discrimination
that they prefer. May offer both full and partial season ticket plans (EXA: buy one, get one 50
percent off)
, Third Degree Price Discrimination - ✔✔Charging different prices for the same good in
different segments of the market.
Can't identify individual willingness to pay, but can sort into groups ---> EXA: student discounts
(student demand is more elastic; there is less demand, they are willing to pay less)
Must prove your a part of your respective group to prevent resale.
Personal seat licenses (PSL's) - ✔✔a personal pays for a PLS to buy season tickets for some
period of time. Then sets variable price at the competitive level.
Wiki definition: a paid license that entitles the holder to the right to buy season tickets for a
certain seat in a stadium.
What does monopoly get right? - ✔✔They impose DWL, but is it all bad? Natural monopoly
Minimum efficient scale: Minimizes the long run ATC (Average total cost)
Incentives for losing on purpose - ✔✔Little to no benefit of winning today. high benefit of
winning in the future. Rewards for finishing lower in the standings. Better draft position. More
payroll flexibility.
Tanking - ✔✔The act of giving up a match or "throwing it away"; losing intentionally or not
competing.
Fan Perspective on Tanking - ✔✔Bad-team fan: Do you care if your team wins a few extra
games or gets top picks for really good players?
Mid-team fan: prefer more difficult competition to make post season?
Good team fan: prefer an available talent source to acquire veterans for the stretch run
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