The Economics of Sports 7e Michael Leeds, Peter von Allmen, Victor Matheson
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(Solutions Manual All Chapters) l l l l
Instructor’s Manual for The Economics of Sports, 7th edition Revised l l l l l l l l l
and updated by Dr Qi Ge, Vassar College, New York, USA
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Chapter 1 l
Economics and Sports l l
◼ Outline
Introduction
1.1 The Organization of the Text l l l l
1.2 Babe Ruth and Comparative Advantage l l l l
Opportunity Costs l
Absolute and Comparative Advantage l l l
l Biographical Sketch: Babe Didrikson Zaharias l l l l
Summary, Discussion Questions, Problems
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◼ Teaching Tips and Additional Examples l l l l
A unique challenge in teaching a course in the economics of sports is refining student expectations for the
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class. Indeed, some professors and departments have been reluctant to offer a course in this field over worries
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that it will attract students wishing to take a “blow-off” course or that the topic of sports cannot be made
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rigorous enough to be included in a college curriculum. Therefore, it is important from the very beginning of
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the class to emphasize that the course is first and foremost an economics class and that sports merely supplies
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the context in which to study economics. As noted by a colleague, “Expectations can sometimes be seriously
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off track for those students who may have chosen the course more because they saw the word ‘sports’ in the
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title rather the word ‘economics.’ ” As you go over the syllabus, it is important to emphasize the economic
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theories that you look forward to covering as opposed to the sports events and history. As the prerequisites for
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this course vary greatly from school to school, as does the intended audience, it may be worthwhile to collect
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information from each student about past coursework in economics and math in order to tailor the class to the
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ability level of the students enrolled.
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It may be helpful to stress that economics is an incredibly flexible subject that can be applied to just aboutany
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facet of life. In this respect, as the course progresses it is often useful to remind the students some parallel
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application to the current topic. The key is to show that the economic principles (and therefore the rigor)
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does not change even if the application of those principles do. This is particularly important if the class is
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offered as a lower level elective with minimal prerequisites but ends up attracting an audienceprimarily made
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up of senior economics majors. With a diverse distribution of students, the emphasis on the application of
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economics will help teach the principles to those who may be seeing these concepts for the first time, and
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reinforcing them to the more advanced students.
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It may also be worthwhile to poll students about their favorite sports and teams, again to tailor the class tothe
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interests of students in class. For example, when teaching competitive balance one can draw examplesfrom
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any league, and using a sport for which students in class have expressed a preference is likely to keep students
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more interested in the topic even as the technical details of measuring competitive balance are explained.
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Similarly, a class with a large number of foreign students, for example, is likely to express
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,Instructor’s Manual for The Economics of Sports, 7th edition
Revised and updated by Dr Qi Ge, Vassar College, New York, USA
more interest in soccer over the “big four” American leagues. In this respect the inclusion of more
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international sports as the editions progressed should benefit the student body. l l l l l l l l l l
As Chapter 1 of the text notes, the text explores sports as it applies to three major areas of economics:
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industrial organization, public finance, and labor. As an opening exercise, you might consider asking the class
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to give examples of how economic forces impact professional and major amateur sports without first
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prompting them about the three areas. Once they have accumulated a good list on the board, see if they can
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divide those issues into the three areas. Some issues, such as those related to competitive balance, willbe
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addressed in more than one area—you can note that as you go along.
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Chapter 1 spends a significantly time on comparative advantage, so be prepared to dive right in on the first
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day of class. A fun exercise that utilizes students’ sports knowledge while reinforcing the idea of comparative
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advantage is to identify other multi-sport athletes and examine their career choices. Charlie Ward, the 1993
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Heisman Trophy winner, chose an NBA career over the NFL, Baseball Hall-of-Famer, Dave Winfield was
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drafted by the NBA, ABA, NFL, and MLB, and Hale Irwin, a 3-time U.S. Open winner and the all-time
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winningest player on the Senior PGA tour, was a top defensive back for the University of Colorado. Deon
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Sanders and Bo Jackson were other multi-sport stars. Byron “Whizzer” White, ultimately chose a law career
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over an NFL career even after leading the league in rushing in 1938.White eventually became a Supreme
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Court Justice.
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◼ Additional Sources l
Throughout the course students will need to keep abreast of current events. Fortunately, this requires nothing
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more than access to the Internet. For each chapter this manual includes examples of quality Websites that
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provide lots of information regarding the sports industry. For the instructor, there are several additional
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sources that are worth considering.
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Film, Television, and Radio: If you like to supplement your classes with film, we recommend the KenBurns
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series Baseball. It is divided into 18 episodes (“top of the first” through “bottom of the ninth”). Each one
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considers a different topic in the development of professional baseball in the United States. Burns addresses
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everything from attempts to form rival leagues to the history of the reserve clause to discrimination. Bill
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Littlefield’s Only a Game, is an informative and amusing weekly radio show appearing on National Public
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Radio. Check your local listings for times.
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Trade Publications: Street & Smith’s Sports Business Journal. This weekly publication provides
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interesting profiles of specific sports, data on attendance, articles, and commentaries on the business
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aspects of sports. While a normal subscription is not cheap, a far less expensive semester-long student
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subscription is available. For more information, check their Web site at
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http://www.sportsbusinessjournal.com/.
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Podcasts: Podcasts are segments, or episodes that are organized via a digital media outlet. They can be
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listened to over the internet or oftentimes downloaded on many smartphones. Finding relevant and reliable
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podcasts can be very beneficial; two sources can be found at www.econtalk.org and www.freakonomics.com
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. A good starting point may be an interview by sports economist Roger Noll on EconTalk on August 27th,
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2012. Slate magazine’s ‘Hang up and Listen’ podcast is another useful source.
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Academic Journals: The Journal of Sports Economics remains the “must have” journal for all instructorsof a
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course in sports economics. For subscription information, go to the Sage Publications Web site at
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http://www.sagepub.com. Other high quality, sports-themed academic journals with frequent economic
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content include International Journal of Sports Finance, Journal of Sport Management, Journal of Sport
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,Instructor’s Manual for The Economics of Sports, 7th edition
Revised and updated by Dr Qi Ge, Vassar College, New York, USA
and Social Issues, European Sport Management Quarterly, International Journal of Sport Management
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and Marketing, and Journal of Quantitative Analysis in Sports.
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On-line Sources: www.sportsbusinessnews.com provides good information and reactions to what is
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happening in sports from a business perspective. You can even elect to receive their “daily dose” of sports
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business news. www.thesportseconomist.com is a blog written by a group of the top economists in the field
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and consistently provides interesting economic analysis of current issues in sports.
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◼ Solutions to Back-of-Chapter Problems l l l
1.1 Use an appropriate economic theory to explain why LeBron James might employ someone to answerhis
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fan mail even if he can read the letters and type the responses more quickly than the person he employs?
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Answer: If LeBron were able to answer his fan mail more quickly than someone he hires; this would
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imply LeBron has an absolute advantage in answering fan mail. LeBron is still likely,
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however, to have a comparative advantage in playing basketball, and therefore heshould
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specialize in playing basketball and hire someone else to answer his fan mail.
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1.2 Is the following statement true or false? Explain your reasoning. “I am attending college on a full
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athletic scholarship, so the opportunity cost of attending college is zero for me.”
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Answer: False. The student is also giving up his or her time. A prime example of this is players who
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leave college early to enter the pros. The opportunity cost of attending college for atop
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basketball player is the lost chance to play in the NBA.
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1.3 From 1946 through 1967, the placekicker for the Cleveland Browns, Lou Groza, was successful on
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54.9 percent of his field goal attempts. In 2021, the Browns’ kicker was Cody Parkey, who was
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successful on 84.6 percent of his attempts. Use the theory of comparative advantage to explain the
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massive improvement in the Browns’ kicking game.
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Answer: While Groza was best known for his kicking, he also played offensive tackle for most ofhis
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career. In the modern game, players are able to specialize, thereby improving their skills.
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This can result in higher field goal percentages for more recent players like Cody Parkey.
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1.4 The term “figure skating” refers to the shapes that skaters used to trace in the ice as part of skating
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competitions. In the 1970s, this aspect of the sport was deemphasized and eventually eliminated. Usethe
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theory of comparative advantage to show why eliminating this part of the competition has led skaters to
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perform much more difficult and sophisticated jumps and spins.
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Answer: The elimination of tracing figures allows skaters to specialize in other techniques such as
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jumps and spins that most fans find more exciting. It also encourages more athletic skaters
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with a comparative advantage in these skills to enter the sport. l l l l l l l l l l l
1.5 Rose Lavelle is widely considered one of the best midfielders in women’s soccer. She is also an
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effective attacker, scoring three goals in the 2019 Women’s World Cup. Based on the theory of
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comparative advantage, what position should Lavelle play?
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Answer: Based on the theory of comparative advantage Lavelle should play midfielder. Lavelle may
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have an absolute advantage in playing midfielder and attacker over many players butshe
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clearly has the comparative advantage in midfielder. Therefore, specializing in midfield
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would yield a better team outcome. l l l l l l
, Instructor’s Manual for The Economics of Sports, 7th edition
Revised and updated by Dr Qi Ge, Vassar College, New York, USA
1.6 Athletes in the US are more likely to specialize in a specific sport today at a much earlier age than a
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generation or two ago when it was much more likely for high school or college students to be multisport
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athletes. What economic factors could explain this shift?
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Answer: One potential explanation for the phenomenon is due to comparative advantages and
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specialization. The earlier athletes can specialize, the more sport-specific training they will receive, which
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will likely make them more competitive in that sport, compared to multisport athletes who do not specialize
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until much later. On the other hand, early specialization is also often driven by incentives due to tournaments
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and superstars and can present significant negative externalities to young athletes.
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1.7 In July 2021, the NCAA modified its policy on athletes profiting from their name, image, or likeness
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(NIL) allowing college athletes for the first time to earn money from endorsements, appearance fees,
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monetizing Instagram/Twitter/TikTok accounts, coaching, or selling autographs.Use the concept of
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opportunity cost to explain whether this change in policy is likely to encourageathletes to stay in
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college and complete their degrees.
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Answer: For a top student athlete, the opportunity cost of attending college is the lost chance to play in
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professional leagues. Such opportunity cost is effectively lowered when student athletes areallowed to
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profit from NIL. As a result, NCAA’s new policy will likely provide stronger incentivesfor student
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athletes to stay in college and complete their degrees.
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