1.  Sports leagues seem to violate various aspects of our notion of competitive behavior: they engage in geographic market segmentation, they collude on negotiations over broadcast revenues, and they tend to restrict player movement, among others.  Check your notes and the text for details on MLB's exemption.

2.  Some economists argue that a certain degree of cooperation is necessary in professional sports in order to coordinate schedules and the rules of the game.

3.    First of all, London is home to Arsenal as well as five or six other English Premier League soccer teams. If Arsenal charges too much for tickets or provides a poor product on the field, soccer fans can simply go across town to Tottenham Hotspurs, Charleton Athletic, Chelsea, or Fulham.  More importantly, however, is the fact that the NFL can restrict entry into the Chicago market, while the EPL is a promotion and relegation league. If Arsenal was making highly monopoly profits, this would give the incentive for other people to start football clubs in London. If the market could support multiple clubs, it is likely that the high revenues earned by the start-up clubs would allow them to spend sufficiently on payroll such that the team would eventually earn promotion to the Premier League and become a full competitor to Arsenal. In fact, most of England’s largest cities, including Birmingham, Liverpool, Manchester, and London, generally have more than one team in the EPL in any given season.

4.

5.  Monopoly power results in a reduction of consumer surplus. Higher ticket prices imply lower sales, both of which eat away at consumer surplus. In addition, monopoly power generates deadweight loss.

6.  PSLs are a form of price discrimination.  Firms attempt to capture additional consumer surplus by charging a lump sum fee upfront that allows fans the right to purchase season tickets. 

7.  Buffalo Bills
a)  Substitute G = 8 into the demand equation to get P = 40.  Total revenue would be $320 [=(40)(8)].
b)  If the Bills practice second degree price discrimination, they can effectively charge P = 120 – 10(1) = 120 – 10 = $110 for single games, P = 110 + 100 + 90 + 80 = $380 = $95/ticket for a four-game package, and P = 120 +110 + 100 + 90 + 80 + 70 + 60 + 50 = $680 = $85/ticket for an eight-game package. Revenues are clearly much higher for the price-discriminating example than one where the team wishes to sell as many as eight tickets to some fans but must sell tickets individually.

8.  Arizona Cardinals.
 P = $120 - 15 = $105 for one game, P = $105 + 90 + 75 + 60 = $230 for a four-game package, and P = $105 + 90 + 75 + 60 + 45 + 30 + 15 + 0 = $420 and eight-game package.  The Cardinals make less revenue by price discriminating than the Bills do because their demand curve lies beneath the Bills' demand curve.

9.    This is for you to ponder.

10.    This one is for you to ponder.

11.  The Miami QB was trying to outguess the FSU defensive secondary.  Even though Moss was Miami's top receiver, the Miami QB must've figured that FSU would double-cover Moss, thereby leaving a secondary receiver wide-open.

12.    First of all, in all cases it must be assumed that the profit-maximizing quantity is below capacity. If the team always fills its stadium, it makes no sense to lower ticket prices since quantity cannot increase. That consideration aside, suppose first that the team wishes to maximize profit. If having more fans increases its chances of winning, then reducing price has two effects on the quantity of tickets demanded. First, additional fans attend because they respond to the lower price. Second, additional fans attend because the team wins more games. This makes the demand for tickets more price elastic, as shown below:

At the price P₀, the quantity demanded rises to Q₁ when fans respond only to changes in price. The quantity rises to Q₂ when the added fans bring more wins, thereby attracting still more fans. As shown below, the team actually charges higher prices with D₂.

Thus, even if the team is concerned solely with profit, it will sell more tickets. Its price, however, will be higher than if having more fans does not affect a team’s record.  If the team wishes to maximize wins, then the impact of attendance on wins increases the marginal benefit of selling more tickets. This means that MB > MC at the original optimum. The team will, therefore want to sell more tickets than before, and it will want to lower its price further than if attendance did not affect wins.

13.  We did this one in class.

14.  This is in your textbook.

15.  Consider the within season and between season measures.

16.  In principle, a salary cap is supposed to limit a team from loading up on high-priced star players. In practice, teams are able to get around the rules by the so-called Larry Bird exemption in the NBA and also by creative structuring of compensation packages, typically involving deferred compensation.

17.  We did this one for homework.

18.  For you to ponder.

19.  The Coase Theorem argues that free agency will have no effect on competitive balance.  According to the Coase Theorem, it doesn't matter who "owns" the player's property rights: as long as transactions costs are low, private bargaining will guarantee that players end up on the teams that value them the most.

20.  We did this in class.

21.  Increase; Increase; Decrease

22.    This is for you to ponder.

23.  Having permanent locations for the Olympic Games would severely limit the IOC's monopoly power.  They would lose the threat of moving the Games to another city if they don't get what they want.  The winner's curse would be greatly reduced as the permanent host cities would become much more knowledgeable about the underlying costs and benefits of hosting the Games over time.

24.    Economic impact studies are typically commissioned by the supporters of a new team and, as such, are likely to be biased in favor of large benefits and small costs. For example, most studies use some type of multiplier analysis while failing to account for potential leakages (which tend to reduce the size of the multiplier). In addition, not all relevant costs may be taken into consideration (particularly opportunity costs).

25.   This is for you to ponder.

26.   This is in your notes (and the powerpoint). 

27.    Taxes on hotels and rental car agencies typically are passed on to consumers in the form of higher prices.  If those attending the sporting event are staying at local hotels and driving rental cars, then such taxes can be viewed as a user fee of sorts and, consequently, may be quite fair in some people's mind.  However, if the sports fan are mostly local folks, then out-of-town visitors may be bearing an unfair portion of the tax bill.

28.    For you to ponder.

29.    Local governments may be hesitant to fork over large subsidies if they believe franchises are likely to pack up and move to another city some time into the future.

30.  Similar problem is in your notes.

31.  Grab a beer and talk this one over.

32.  Grab another beer and talk this one over.

33. Tax the relatively inelastic product--kidney dialysis machines.