Ticket Prices and Player Salaries

Posted on May 28, 2006 by

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Malcolm Gladwell has focused primarily on the stories we tell about basketball.  His very positive review in The New Yorker and his comments yesterday at his website each explain clearly the story we tell with respect to the NBA. 

The Wages of Wins, though, is not strictly about the NBA.  Our research in sports economics reveals that beliefs people hold with respect to baseball and football also fail to match the empirical evidence.

To illustrate our ability to comment on something beyond hoops, a few days ago Marty asked why fans of the NFL were more likely to blame players than owners for breakdowns in labor negotiations.  Marty did not answer this question.  Fortunately, fellow sports economist Don Coffin posted a comment that I would like to highlight:

“I think the explanation is fairly simple. Economists are comfortable with the argument that increased demand for tickets leads to increased ticket prices, and that with player salaries being essentially unrelated in the short run (and in the long run) to the marginal cost of seating additional fans, demand, not costs, drive ticket prices. Most people are not, and for a fairly good reason. In most cases, increases in wages/salaries DO lead to increases in the marginal costs of producing a product, and therefore to increased prices. What people are doing is generalizing from the usual situation, to a situation in which that generalization does not work properly. What I think might be interesting is to survey people who have taken a course in sports economics to see how they respond to this issue. It’d be depressing to discover that they haven’t learned the correct analysis.”

This response highlights a common feature of research in sports economics.  Much of what we say in sports economics contradicts what people already believe.  Although sports economists have explained for years that consumer demand leads to higher ticket prices, and higher ticket prices lead to higher player salaries, many people have either not heard the message, or are not convinced.

In my Sports Economics course this topic was covered a few weeks ago.  I wonder if my students still understand the message sports economics says about the relationship between ticket prices and player salaries.  I also wonder if my students are looking at our website.  A quick quiz next Wednesday night could provide answers to both questions. 

— DJ

Posted in: Sports Econ