KrautmannBerri2007

KrautmannBerri2007 - Journal of Sports Economics...

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http://jse.sagepub.com/ Journal of Sports Economics http://jse.sagepub.com/content/8/2/183 The online version of this article can be found at: DOI: 10.1177/1527002505275093 2007 8: 183 Journal of Sports Economics Anthony C. Krautmann and David J. Berri Professional Sports Can We Find It at the Concessions? Understanding Price Elasticity in Published by: http://www.sagepublications.com On behalf of: The North American Association of Sports Economists can be found at: Journal of Sports Economics Additional services and information for http://jse.sagepub.com/cgi/alerts Email Alerts: http://jse.sagepub.com/subscriptions Subscriptions: http://www.sagepub.com/journalsReprints.nav Reprints: http://www.sagepub.com/journalsPermissions.nav Permissions: http://jse.sagepub.com/content/8/2/183.refs.html Citations: at SOUTHERN UTAH UNIV LIB on August 29, 2010 jse.sagepub.com Downloaded from
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10.1 7 /15270 2505275093 JOURNAL OF SPORTS ECONOMICS / April 20 7 Krautman , Ber i / PRICE ELASTICITY IN PROFES IONAL SPORTS Research Note Can We Find It at the Concessions? Understanding Price Elasticity in Professional Sports ANTHONY C. KRAUTMANN DePaul University DAVID J. BERRI California State University, Bakersfield The sports economics literature regularly finds that sports teams price admissions in the inelastic range of demand. Given that marginal revenue is negative in this range, yet mar- ginal cost is always nonnegative, this result suggests an inconsistency in the profit motive of owners. In this article, we attempt to explain inelastic ticket pricing by considering the complementarity between tickets sold and concessions. Depending on marginal revenue and cost parameters, we show that it is entirely possible to find profit-maximizing owners pricing tickets in the inelastic region of demand to sell more concessions. Keywords: concession revenues; inelastic pricing in MLB The economics literature that analyzes the demand for attendance consistently finds inelastic ticket pricing. R. Fort, 2003 T he cost of attending a Major League Baseball (MLB) game, although not as steep as that in the National Football League (NFL) or National Basketball Associ- ation (NBA), has risen dramatically during the past decade. Team Marketing’s annual survey of the cost of att3ending a professional sporting event reports that the average ticketpricefor abaseballgamemore than doubled between 1991 and 2002. When all costs of attending a game are considered, the costs to a family of four of 183 JOURNAL OF SPORTS ECONOMICS, Vol. 8 No. 2, April 2007 183–191 DOI: 10.1177/1527002505275093 © 2007 Sage Publications at SOUTHERN UTAH UNIV LIB on August 29, 2010 jse.sagepub.com Downloaded from
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attending a game rose from about U.S. $80 to more than $140—about twice the rate of inflation across all recreational services. In spite of the popular criticism laid on owners for charging so much, sports economists regularly find that fans pay a lower price than that which would maxi- mize team profits. In fact, what is evident from a search through the literature is that ticketprices of sporting events are regularly priced in the inelasticrange of demand.
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KrautmannBerri2007 - Journal of Sports Economics...

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