The Economical Impact of Baseball for the Baseball Teams to the Cities

The Economical Impact of Baseball for the Baseball Teams to the Cities

Introduction

Often referred to as America's national pastime, professional baseball has existed in the United States since the mid-1800s. By 1903, two major leagues had formed the National League (NL) and the American League (AL). Each contained eight teams, and in 1903, the two leagues held the first postseason championship series, which is now referred to as the World Series. Today, both leagues are still in existence and together they make up Major League Baseball (MLB). The paper discusses the economic impact of baseball teams of the selective are on the economy and how the sport has been reviving for the state so far.

The Impact

Profit Maximizing Behavior

Several of the economic models treat a single team as the firm. Alternatively, some models deal with the league as a cartel or social planner, and each individual team are considered to be a member of this group. There is a healthy literature on modeling both firms and leagues in the context of competitive balance. Papers in this area cover the measurement of competitive balance and the optimal policies to promote competitive balance in a league. Those studies are discussed in the section on competitive balance (Dusansky, Vernon, 1998).

A simple model of static profit maximization of a sports firm is contained in the leading undergraduate textbook on sports economics. Michael Leeds and Peter von Allmen (2008) define profits as the difference between revenues and costs. Team revenues are broken down into gate revenues, broadcast revenues, and licensing and other stadium-related revenues, such as concessions and naming rights. Costs are usually dominated by players' salaries in the major leagues. Other costs include items such as travel, marketing, and administrative costs, including league costs (Dusansky, Vernon, 1998).

Market Power in Sports

Another characteristic of sports teams is that they usually possess some degree of market power in both the product and input markets. A team is usually the only seller of a particular professional sports product in the output market (monopoly) and often the only employer of professional athletes in that sport in that particular city. Recent empirical evidence by Stacey Brook and Aju Fenn (2008) seems to suggest that NFL teams do possess market power over their consumers. When college football athletes look at professional football as a career, there are a limited number of leagues or employers. Such an employment scenario with a single employer meets the classic definition of monopsony (Depken, 2006).

Lawrence Kahn (2000) provides an overview of the studies that discuss monopsony and other labor market issues in sports. Harmon Gallant and Paul Staudohar (2003) examine how antitrust law in the United States has influenced the evolution of professional sports leagues. Stephen Ross (2003) considers 10 important antitrust decisions where courts have ruled against sports leagues and examines whether these decisions were in the best interest of the public from an economist's point of view ...