Sports Economics

Topics: Economics, Pricing, Profit Pages: 12 (2090 words) Published: August 21, 2013
Profit Maximiser MR = MC
An industry can be defined from two criteria:
- similarity of products
- similarity of economic activities
A Sport industry can be defined as a cluster of firms that:
- produce sport activities
- provide products and services
- trade and sell products
Meeks ‘3-Sector’ Model of the sport industry:
Sector #1: Sports Entertainment
Sector #2: Sports Products
Sector #3: Sports Support Organisations
Li, Hofacre and Mahoneys ‘2-Sector’ Model of the sport industry: Assumption #1: relates to sport activities
Assumption #2: industry itself is different
Sector #1: Sport Activity Producing Sector. eg - professional/semi-professional teams, recreational sport establishments, college/school sport competitions Sector #2: “Sub-Sectors” The Sport Supporting Sector. eg – sell and trade, product provision

The Sport Activity Producing Sector (middle circle)
* Professional and semiprofessional teams
* Intercollegiate/interscholastic athletics
* Municipal and county recreation departments
* Recreational sports establishments
* Independent professional athletes and other independent activity producers

The Sport Supporting Sector (6 surrounding circles)
* Providing products and services
* Selling and trading products

1. Administrative or Regulatory Associations in Professional Sport Primary responsibility:
* Constructive environment
Major activities:
* Competition schedules
* Collective bargaining agreements
* Various rules and regulatory policies
* National TV agreements

2. Sporting Goods & Manufacturers
* Athletic sport clothing, footwear and equiptment
* Recreational transport
* Manfacture sporting goods or, companies that distribute and sell

3. Sports Facilities and Buildings Defined
* Varies depending on size.
* Varies also depending on the type of the facility ownership.

4. Sport Media Defined
* Entertains consumers
* Broadcast, Print and Internet media

5. Sports Management Firms Defined
* organizing, promoting and/or managing sports events
* representing and managing professional athletes
* providing legal & financial consultant services to sport firms/organizations & athletes

Services Provided by Sport Management Firms
* organizing, promoting and/or managing sports events
* representing and managing professional athletes
* providing marketing services
* providing legal and financial consultation to sport firms and organizations, and to individual athletes.

6. State, Municipal and County Sport Commissions and Authorities - Promote and develop sport
- Regulate competition
- satisfy needs and interests

Economic Systems
- Command: made by authority
- Market: made based on the interaction between buyers and sellers - Tradition: made by past policies and cultural beliefs

Opportunity cost is the value of the best alternative given up when a decision is made. * Explicit cost
* Implicit costs

Economic Profit: Revenue – Explicit and Implicit Costs
Accounting Profit: Revenue – Explicit Costs
Explicit Costs: direct $ payment
Implicit Costs: opportunity costs (the cost of attaining something)

Determinants of Demand
* Price of the item itself
* Price of other related goods
* Expectations about the future
* Changes in consumer tastes
* Income levels

Other Elements Affecting Demand for Sport Activity
* Age, education, and gender
* Travel time to activities, quality of the attraction, and congestion * Price, uncertainty of outcome & quality
* Price is not as significant as other factors
* Uncertainty of outcome

Factors affecting Supply
* Price of the product
* Prices of inputs
* Technology
* Supplies
* Taxes and subsidies

Price Ceiling & Floor
Price floors and price ceiling is setting a price on a certain good. Price floors sets a minimum price limit that...
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