compbalanceF11sports

compbalanceF11sports - Thedistributionofwins...

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The distribution of wins  in professional team  sports most consistent  with  the maximization of  league profits.
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Neal, Walter. “The Peculiar Economics of Professional Sports”  Quarterly Journal of Economics  78 (February, 1964): 1-14.   Louis-Schmelling paradox The inverted joint product or the product joint Joint product - two products technologically resulting from a single  process. Product joint - An indivisible product from the separate processes  of two or more firms. Professional baseball produces several interrelated streams of  utility In-person viewing of the game Broadcasts of games League standing effect Fourth Estate Benefit Conclusion: The several joint products which are products  joint of legally separate business firms are really the complex  joint products of one firm, and this firm is necessarily an all- embracing firm or natural monopoly.
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Neale (1964), cont. Four possible cases of interleague competition: Major League Baseball solution: the joining of two leagues into  one monopoly. The professional football solution of the 1940s: The bankruptcy  of one league. Survival of two or more leagues that are not economically  competitive due to geographic distances or the institutions of  sport and culture.  Survival of two or more leagues that are economically  competitive and which could be sportingly competitive. The second case is the most common solution. Geographic  distances and culture institutions seem to be overcome  overtime (exception CFL and Japanese baseball). In general, additional leagues bid up costs and reduce  revenues, hence reducing the profitability of each league.
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Uncertainty of Outcome Why is balance important?  Uncertainty of outcome is crucial  to the demand for sporting events.  The works of Knowles,  Sherony and Haupert (1992), and Rascher (1999) found that  Major League Baseball attendance was maximized when the  probability of the home team winning was approximately 0.6. These studies suggest that consumers prefer to see the home  team win, but do not wish to be completely certain this will  occur prior to the game being played.  Knowles, Glenn, Keith Sherony, and Mike Haupert. 1992. “The Demand for Major  League Baseball: A Test of the Uncertainty of Outcome Hypothesis.”  The American  Economist , 36, n2, Fall: 72-80. Rascher, Daniel. 1999. “A Test of the Optimal Positive Production Network Externality in 
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compbalanceF11sports - Thedistributionofwins...

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