Key concepts:
1.) Meeks' Model of the Sport Industry- divides the sport industry into
three different sections. Sport entertainment, sports products, and
sports support organizations.
2.) Model of the Sport Industry- includes one main sector (sport
producing sector) and 6 sub sectors:
1. Administrative sport organizations
2. Manufacturers and retailers
3. Sports facilities and buildings
4. Sport media
5. Sport management firms
6. State municipal authorities
These are both very important because it describes what the current sport industry is like. They are both describing the sport industry but in different ways.
Sporting example for both models:
The Brewers with the model of the sport industry
Sport Producing Sector: Professional team
Sub sectors:
1. The marketing team performs actions that help promote their team and organization.
2. Brewers Pro Shop.
3. Miller Park stadium.
4. Their games are televised. Highlights of the games are on ESPN and also there are news reports in the local newspaper.
5. Sponsorships help give money to the brewers and the players so companies can endorse their product through sport.
6. Follow M.L.B. rules and follow the commissioners final rule or say in
any conflict. (Rules)
Question for further discussion
Can you think of another example that follows one of these models?
(A non-professional team)
Chapter 2
Key concepts:
Profit Maximization and the Nature of Profit- Companies and organizations trying to get the most of a firm’s current and future profits. This includes both implicit and explicit costs.
Profit Maximization and the Nature of Profit- Companies and organizations trying to get the most of a firm’s current and future profits. This includes both implicit and explicit costs.
Firm behavior : Sparkcharts. (n.d.). Sparknotes: Sparkcharts. Retrieved May 3, 2010, from
http://sparkcharts.sparknotes.com
http://sparkcharts.sparknotes.com
Eschenfelder, M. J., & Li, M. (2007). Basics of economic analysis. The economics of sports
(2 ed., pp. 25-36). Morgantown: Fitness information technology.
(2 ed., pp. 25-36). Morgantown: Fitness information technology.
Chapter 3
Key concepts:
Demand: This is the willingness and ability of consumers to purchase the goods and services. It is relevant to sport economics because if a consumer has a demand for a particular product it implies they are willing to exchange money for the service. An example of this is buying tickets for the Green Bay Packers, because they are so high in demand people are willing to pay large sums of money to purchase a ticket.
Pg. 38 (Eschenfelder, 2007)
Law of Demand: if all things are equal, the lower the price of a commodity, the higher the quantity demanded; and the higher the price, the lower the quantity demanded. This is relevant to economics as if something is inexpensive then more people will want to buy the product or service. A sporting example of this is when jerseys go on sale they sell out much faster.
Pg. 38 (Eschenfelder, 2007)
Market equilibrium: amount that consumers demand and the amount that producer’s supply is in balance. At this point prices remain constant. This is important as it allows the producers to see that they are marketing their product or service at a price that is affordable and consumers are willing to pay that for the particular product. A sporting example is when ticket sales are constant at a certain price that is set and both the consumer and producer are happy at that figure.
Pg. 48-49 (Eschenfelder, 2007)
Pg. 48-49 (Eschenfelder, 2007)
Chapter 4
Key concepts:
Barriers: factors that make it difficult for a new firm to enter a market. These include: advertising, product differentiation, patents, product bundling, economies of scale, and legal barriers. Sporting example of this is Nike makes it difficult for a new firm to enter the athletic shoe industry because of its advertising and product differentiation- Nike is so broad.
Monopoly- market where one firm has no competing products (NFL)
Pure Competition- firms do not control price of product
Monopoly and Society- monopolists restrict output to control price (M.L.B. restricts number of franchises)
Barriers: factors that make it difficult for a new firm to enter a market. These include: advertising, product differentiation, patents, product bundling, economies of scale, and legal barriers. Sporting example of this is Nike makes it difficult for a new firm to enter the athletic shoe industry because of its advertising and product differentiation- Nike is so broad.
Monopoly- market where one firm has no competing products (NFL)
Pure Competition- firms do not control price of product
Monopoly and Society- monopolists restrict output to control price (M.L.B. restricts number of franchises)
Chapter 5
Key concepts:
Cost-Price Pricing:
· Cost-Price Pricing begins with an estimate of costs.
· The Measure of cost is multiplied by a mark-up factor to determine price.
· The More elastic the demand, the more sensitive consumers are to price change.
· The less sensitive consumers are to price changes, the higher the profit maximizing mark-up
Example:
A baseball glove manufacture should use different mark-up factors for different gloves.
For low-end gloves there are more substitutes, demand will be more elastic and the profit maximizing mark-up less than for high-end gloves for which there are fewer substitutes and a less elastic demand.
Questions: Due to the price difference from high end gloves to low end gloves will glove manufactures decide to cut the making of all low end gloves so consumers are forced to buy high end gloves?
Cartels:
· Differs from collusion because of the existence of a formal agreement to act together to fix prices
· Includes mechanism to detect and punish cheaters
· Prior to 1981, the NCAA sold the broadcast rights to college football games for all its members to the national television networks.
· The NCAA acted as a cartel by limiting output to increase their price.
· In 1984, the Supreme Court ruled in favor of universities, ending the NCAA cartel in network broadcast rights.
· Televised college football games increases
Examples:
· The NFL is an example of a remaining legal cartel in sport.
· They are allowed to sell packages of games to television networks of their choice.
· Also, they can restrict the sale of television broadcast rights by individual franchises.
· If specific franchises were to try to sell television broadcast rights beyond league restrictions, the league would punish them.
Question: Will the NFL continue to be able to run a cartel when it comes to broadcasting rights for games?
References
Chapter Five: Oligopoly and the Sport Industry. (2007). In M. J. Eschenfelder & M. Li (Authors), Economics of Sport (Second ed., pp. 77-84). Morgantown, WV: Fitness Information Technology.
Cost-Price Pricing:
· Cost-Price Pricing begins with an estimate of costs.
· The Measure of cost is multiplied by a mark-up factor to determine price.
· The More elastic the demand, the more sensitive consumers are to price change.
· The less sensitive consumers are to price changes, the higher the profit maximizing mark-up
Example:
A baseball glove manufacture should use different mark-up factors for different gloves.
For low-end gloves there are more substitutes, demand will be more elastic and the profit maximizing mark-up less than for high-end gloves for which there are fewer substitutes and a less elastic demand.
Questions: Due to the price difference from high end gloves to low end gloves will glove manufactures decide to cut the making of all low end gloves so consumers are forced to buy high end gloves?
Cartels:
· Differs from collusion because of the existence of a formal agreement to act together to fix prices
· Includes mechanism to detect and punish cheaters
· Prior to 1981, the NCAA sold the broadcast rights to college football games for all its members to the national television networks.
· The NCAA acted as a cartel by limiting output to increase their price.
· In 1984, the Supreme Court ruled in favor of universities, ending the NCAA cartel in network broadcast rights.
· Televised college football games increases
Examples:
· The NFL is an example of a remaining legal cartel in sport.
· They are allowed to sell packages of games to television networks of their choice.
· Also, they can restrict the sale of television broadcast rights by individual franchises.
· If specific franchises were to try to sell television broadcast rights beyond league restrictions, the league would punish them.
Question: Will the NFL continue to be able to run a cartel when it comes to broadcasting rights for games?
References
Chapter Five: Oligopoly and the Sport Industry. (2007). In M. J. Eschenfelder & M. Li (Authors), Economics of Sport (Second ed., pp. 77-84). Morgantown, WV: Fitness Information Technology.
Chapter 6
Key concepts:
Local governments- are the closest to the consumer and provides the most services. They will generally allocate 2% of an annual operating budget to spend on recreation services including sport. This does not include special requests such as new stadiums. County government is the next level up and they also allocate money towards sport. A problem with government spending is that when a team threatens to leave the town due to not getting money granted some governments agree to such costs like a stadium.
This goes along with the economic principle that governments can sometimes improve market outcomes. When a market fails to allocate resources efficiently, the government can change the outcome through public policy.
Local governments- are the closest to the consumer and provides the most services. They will generally allocate 2% of an annual operating budget to spend on recreation services including sport. This does not include special requests such as new stadiums. County government is the next level up and they also allocate money towards sport. A problem with government spending is that when a team threatens to leave the town due to not getting money granted some governments agree to such costs like a stadium.
This goes along with the economic principle that governments can sometimes improve market outcomes. When a market fails to allocate resources efficiently, the government can change the outcome through public policy.
Chapter 7
Key concept:
GDSP: is generally measured with the use of the Expenditure Approach: personal consumption expenditures, gross private domestic investments, government purchase of goods and services, and net exports of goods and services.
It is the sum of the value of the final goods and services produced domestically by the sport industry.
GDSP: is generally measured with the use of the Expenditure Approach: personal consumption expenditures, gross private domestic investments, government purchase of goods and services, and net exports of goods and services.
It is the sum of the value of the final goods and services produced domestically by the sport industry.
Measurement for this is more complex than that of measuring the GDP because of two reasons:
The scope of what we call sport can be very limited or inclusive depending on how we define “sport”.
The second reason is because there is no sole category of expenditures in sport defined by government economic statistics. The economic significance of sport has been counted only as a contributor to the recreation and entertainment industry.
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