Subsidized monopolists and product prices: the case of Major League Baseball
Abstract:I analyse the setting of ticket prices when teams receive subsidization. I model teams as entertainment providers, where entertainment is generated by selling wins and amenities. I argue that subsidization of teams generally comes from subsidizing the amenities in the teams' stadiums. Subsidization lowers the marginal cost of providing them to fans, driving ticket prices lower. The empirical analysis suggests that this is the case. The average team playing in a 5-year-old public stadium charges a ticket price that is 40 cents less than the same team playing in a private stadium of the same age.
Document Type: Research Article
Affiliations: Department of Economics, Minnesota State University, Mankato, MN 56001, USA
Publication date: November 1, 2009