COURSEWORK>>PROBLEMS

PROBLEM ONE: Due 21 January
According to The Sporting News, Paul Tagliabue, the Commissioner of the NFL, is the most powerful man in American sports.

(A) How do you define power?
(B) What does economics have to do with power in sports?
(C) Economist frequently talk about individuals pursuing their own best interests. What goal or goals does Tagliabue pursue? I.e., what's he trying to accomplish and how does that make him better off?

PROBLEM TWO: Due 28 January
Approximately one year ago, the Honolulu Advertiser reported with some astonishment that the University of Hawaii had raised the prices on many of the tickets for its football and basketball teams, but its total ticket revenues nevertheless declined.

How could this be, asked the newspaper, which quoted several incredulous UH athletics administrators.

Explain the economic circumstances that could have led to this situation.

PROBLEM THREE: Due 4 February
It's 2007 and Hampton Roads is opening a new baseball park for its MLB team, the Hampton Roads Tides. The Tides have hired some cracker jack economists who have told them that the demand function for Tides tickets for a single game is given by: Q = 75,000 - 1,000P or P = $75 - .001Q. (We'll ignore complications such as the quality of the opponent, the weather, the time of the game, the differing quality of seats, etc.)

(A) If the Tides have no variable costs of production, then what is the profit-maximizing price for them to charge for each ticket? How many fans will attend? What is the total profit the Tides will make on each game?

(B) If the marginal cost of serving each fan is $1.00, then what is the profit-maximizing price and how many fans will purchase tickets and attend? How much profit do the Tides make on each game?

(C) Now, let's assume that the Tides' economists have informed them that the ticket buying market could be divided into two parts, which we'll call the High Market and the Low Market. The High Market demand function is given by: Q = 10,000 - 25P or P = $40 - .04Q. The Low Market demand function is given by: Q = 60,000 - 900P or P = $66.6667 - .0011Q. Find the profit-maxizing price and quantity in each market. How much profit do the Tides make on each game?

(D) Suppose the marginal cost of serving each fan in the High Market is $3.00, while it's only $1.00 in the Low Market. Recompute price and quantity in each market and total profit. Does it make sense to divide the market?

(E) What controls or restrictions must the Tides impose at their stadium for each game in order to be able to bifurcate their market successfully into a High Market and a Low Market?

PROBLEM FOUR: Due 3 March
Consider the phenemonon of racial discrimination on the basis of race.

(A) What are the economic conditions that make racial discrimination against, say, Africcan Americans, most likely to occur?
(B) If owners do discriminate, say, against African American players, what are the most likely reasons they do so?
(C) What evidence is there that racial discrimination does exist in players' salaries and rosters?

PROBLEM FIVE: Due 17 March
The City of Norfolk says that it will pay for a new major league baseball (MLB) stadium substantially by means of the additional tax revenues the City will collect because the team is located in Norfolk.

(A) Under what precise circumstances will the City of Norfolk actually collect more tax revenues (citywide) because an MLB team is located in Norfolk?
(B) What about other cities within the region such as Virginia Beach? Will they collect additional tax revenues? Why or why not?
(C) What about the Commonwealth of Virginia? Will it collect additional tax revenues?
Why or why not?
(D) Suppose the total revenues of the MLB team approximate $125 million annually. Is this the net additional economic impact of the MLB team to Norfolk? Why or why not?

PROBLEM SIX: Due 24 March
Assume that you're running a track meet such as the Melrose Games. What do economic theory and empirical evidence have to say to you about:

(A) The best way to attract the best and largest number of competitors;
(B) The best way to avoid situations in distance races where competitors run "strategically"
in order to block other runners, etc., rather than running for the fastest time?
(C) The best way to deal with a situation in an event where one contestant clearly is much better than the other contestants;
(D) The best way to avoid situations where competitors who are behind in preliminary rounds of competition begin to slack off and not do their best in later rounds.

PROBLEM SEVEN: Due 7 April
Many observers believe the NCAA functions as a cartel, not unlike OPEC. Like OPEC, the NCAA has difficulties getting its membership "to behave," that is, to follow its rules. From an economic standpoint, what are the sources of the NCAA's weaknesses here? That is, what things militate against it being an extremely effective cartel that is able to keep its members from breaking its rules and going their own way?

PROBLEM EIGHT: Due 14 April
A few years ago, the New York Yankees developed the Entertainment and Sports Network, which is known by the acronym YES. From its very start, YES has come into conflict with cable television networks in the New York region.

(A) What are the economic sources of the conflict?
(B) What do "cable tiers" have to do with this?
(C) A recent arbitration decision greatly strengthend the negotiating hand of YES. How so?

PROBLEM NINE: Due 21 April
The reports that Sports Economics student have made in class reveal that some exceedingly complex financial relationships exist between professional sports teams, the
media outlets who cover them, the stadiums in which they play, and the concessions
and merchandise they sell in and around their stadiums.

(A) What does this have to do with our ability to determine which teams actually are making money? Explain.
(B) To demonstrate the point you have just made in (a), provide one actual illustrative example of such a relationship between a sports team and the media; an actual illustrative example of the relationship between a sports team and the stadium in which it plays; and, an actual illustrative example of the relationship between a sports team and its concession and merchandise sales.