Economics and the Sports Industry: Theory and Applications
Edition: 1
Copyright: 2021
Pages: 402
Edition: 1
Copyright: 2021
Pages: 402
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Most industries provide a workable context for teaching the core concepts of economic theory. As an instructor for core microeconomic theory classes throughout my teaching career, I have found that students respond favorably to examples and contexts that they can readily relate to.
This text offers student an opportunity to study microeconomic topics, macroeconomic topics, and econometric topics in the fascinating context of the sports industry.
Economics and the Sports Industry: Theory and Application is written with a focus on introductory to intermediate level economic theory. The intended audience for this text is undergraduate students studying economics at a first year to second year level.
Key Topics Include:
- A full investigation of supply and demand
- A comprehensive treatment of market context with a particular focus on Monopoly.
- An introduction to econometrics and sabermetrics with applications.
- The structure and organization of the sports industry.
- The importance of media, fantasy sports, sport betting and e-sport.
- Topics in labour economics in the context of the sports industry, and
- Much More…
CHAPTER 1: A Brief History of North American Sport
1.1 The Organization of the Text
1.2 Stylized Facts Concerning North American Sports Leagues
1.2.1 Economic Size
1.2.2 A Summary of Broadcast Rights
1.2.3 Peripheral Economic Activity and Relative Size
1.3 A Brief History of the North American Leagues
1.3.1 Hockey
1.3.2 Basketball
1.3.3 Baseball
1.3.4 Football
1.4 League Functions
CHAPTER 2: Demand and Supply
2.1 Demand
2.1.1 The Demand Curve and Equation
2.1.2 Shift Factors for the Demand Curve
2.2 Supply
2.2.1 The Supply Curve and Equation
2.2.2 Shift Factors for the Supply Curve
2.3 Market Equilibrium
2.3.1 Price Adjustments: Shortage
2.3.2 Price Adjustments: Surplus
2.4 Analyzing Equilibrium Changes
2.5 Important Modifications to the Model
CHAPTER 3: Market Structures
3.1 Perfect Competition
3.1.1 Modelling Assumptions of Perfect Competition
3.2 Monopolistic Competition
3.2.1 Modelling Assumptions of Monopolistic Competition
3.2.2 Equilibrium in a Monopolistically Competitive Market
3.2.3 Efficiency Comparison
3.3 Oligopoly
3.3.1 Modelling Assumptions of Oligopoly
3.4 Monopoly
3.4.1 Modelling Assumptions of Monopoly
CHAPTER 4: A Closer Look – Monopoly with Applications
4.1 Applications of the Market Model
4.1.1 Consumer Surplus and Producer Surplus
4.2 Comparing Total Surplus in Perfect Competition and Total Surplus in a Monopoly
4.3 Price Discriminating Monopoly
4.4 Exclusive Territorial Rights and the Reserve Clause
4.5 Public Choice Perspective
4.6 Barriers to Entry
4.7 Antitrust
4.8 Antitrust Exemptions in Sport
CHAPTER 5: Econometrics and Sports – An Introduction
5.1 What is Econometrics? Why do we use it?
5.1.1 Uses of Econometrics
5.2 Regression Analysis
5.2.1 Dependent and Independent Variables
5.2.2 Single-Equation Linear Models
5.2.3 The Error Term
5.2.4 Standard Notation
5.2.5 Estimation
5.3 Regression Analysis: An Example
5.4 Coefficient of Determination
5.5 A Better Coefficient of Determination: Adjusted
5.6 Methodology and Statistical Significance
5.6.1 Step 1: Review the Available Literature and Formulate a Theoretical Model
5.6.2 Step 2: Specify the Model
5.6.3 Step 3: Hypothesize
5.6.4 Step 4: Collect the Data
5.6.5 Step 5: Estimate and Evaluate the Regression Equation
5.6.6 Step 6: Present the Results
CHAPTER 6: Performance Measures and ‘Sabermetrics’
6.1 Sabermetrics or SABRmetrics in MLB
6.1.1 WAR – Wins Above Replacement
6.1.2 Offensive Wins Above Replacement and Defensive Wins Above Replacement
6.2 The Production Possibility Frontier
6.3 Specialization and Gains from Trade
6.4 Corsi in the NHL
6.5 Player Efficiency Rating (PER) in the NBA
6.6 Quarterback (QB) Rating in the NFL
CHAPTER 7: Profit Maximization
7.1 Profit Motive
7.2 Standard Profit Maximization
7.2.1 Output Maximization
7.2.2 Cost Minimization
7.3 Sources of Revenue in Sports
7.3.1 A Closer Look at Sports Revenue
7.3.2 Home Game Ticket Sales
7.3.3 Local and National Broadcast Rights
7.4 Sources of Costs in Sports
7.5 Vertical Integration – Owning a Sport Franchise and a Media Outlet
APPENDIX TO CHAPTER 7: Examples of Profit Maximization (Duality)
7A.1 Known Values for (Output Maximization Example #1)
7A.2 Known Values for (Cost Minimization Example #1)
7A.3 Known Values for (Output Maximization Example #2)
7A.4 Known Values for (Cost Minimization Example #2)
7A.5 Duality of Production and Cost
CHAPTER 8: Game Theory in Sports
8.1 Game Theory
8.2 Solution Concept #1: The Elimination of Dominated Strategies
8.3 Solution Concept #2: Nash Equilibrium
8.4 Mixed Strategy Nash Equilibrium
CHAPTER 9: The Business of Sport
9.1 The Franchise Model
9.2 Single-Entity Leagues: MLS
9.3 Open System
9.4 Fantasy Sports and Sports Betting
9.5 E-Sports
9.5.1 E-Sports Leagues
9.5.2 E-Sports Tournaments
9.6 The All-or-Nothing Demand Curve
9.7 The Winner’s Curse
CHAPTER 10: Competitive Balance
10.1 Competitive Balance: Why does it Matter?
10.2 Maximum Parity is Economically Undesirable
10.3 Measures of Competitive Balance
10.3.1 Within-season Variation
10.3.2 Between-season Variation
10.3.3 An Alternate Use of the Hirfindahl-Hirschman Index (HHI)
10.4 Competitive Balance Initiatives
10.4.1 Reverse-Order Entry Draft
10.4.2 Luxury Taxes
10.4.3 Salary Caps
10.4.4 Revenue Sharing
10.4.5 Schedule Adjustments in the NFL
10.5 The Reserve Clause versus Free Agency
CHAPTER 11: Labour Economics in Sport
11.1 Labour Supply
11.2 Labour Supply with Fixed Hours
11.3 Labour Demand
11.4 Labour Market Equilibrium
11.5 A Monopsonist in the Labour Market
11.6 Labour Productivity and Training
CHAPTER 12: Labour: Unions and Collective Bargaining
12.1 Labour Revolution in Sports
12.2 Labour Unions
12.2.1 Craft Unions and Industrial Unions
12.2.2 Professional Tennis Associations
12.2.3 Bilateral Monopoly
12.3 Salary Arbitration
12.3.1 Final Offer Arbitration
12.3.2 Binding and Non-Binding Arbitration
12.4 Tournament Compensation
12.5 The Lorenz Curve
CHAPTER 13: Public Expenditure
13.1 Public Expenditure
13.1.1 Public Goods
13.1.2 Samuelson’s Allocation, Lindahl’s Pricing, and the “Free Rider” Problem
13.1.3 Sports Teams and Facilities as a Local Public Good
13.2 Externalities
13.2.1 Positive and Negative Externalities
13.2.2 Classification of Externalities
13.2.3 Social vs. Private Costs
13.2.4 Inefficiency of Externalities
13.3 Public Funding of Professional Sports Teams and Facilities
13.4 Social Cost – Benefit Analysis
13.5 Multiplier Effects
Corey Van de Waal is the oldest of seven children. He was born and raised in Woodstock, Ontario which is a small city in an otherwise rural southwestern portion of the province. Once he completed secondary school, Corey took a non-traditional path into academics. First, he spent more than twelve years working as an industrial baker before deciding that a new career was in order.
In 1999, at the age of (nearly) thirty-one, Corey enrolled as an undergraduate at the University of Waterloo. Since he was a mature student, early in his undergraduate studies he was often mistaken by his classmates as the course instructor. In 2004, Corey graduated on the Dean’s List with a degree in Applied Economics (co-op), a Management Studies minor, and a specialization in Public Policy.
Corey continued with his graduate studies at the University of Waterloo and specialized in Public Policy and Microeconomic Theory. In 2006, during the first year of his PhD, Corey was given the opportunity to teach an intermediate microeconomics class. That experience ignited his passion for teaching. In 2007, Van de Waal was the driving force behind the “Economics Clinic”; a place where first year and second-year economics students could visit to receive help with their foundational economics classes.
Corey was hired as a Continuing Lecturer in the University of Waterloo Economics Department in 2010. He began developing plans to create an economics of sport course for the curriculum immediately after he was hired. In 2013, those plans came to fruition with the inaugural offering of the course. Student reception for the class has been wildly positive.
Years of student feedback and their desire to know more about economics and the sports industry was the primary driver for this textbook.
Most industries provide a workable context for teaching the core concepts of economic theory. As an instructor for core microeconomic theory classes throughout my teaching career, I have found that students respond favorably to examples and contexts that they can readily relate to.
This text offers student an opportunity to study microeconomic topics, macroeconomic topics, and econometric topics in the fascinating context of the sports industry.
Economics and the Sports Industry: Theory and Application is written with a focus on introductory to intermediate level economic theory. The intended audience for this text is undergraduate students studying economics at a first year to second year level.
Key Topics Include:
- A full investigation of supply and demand
- A comprehensive treatment of market context with a particular focus on Monopoly.
- An introduction to econometrics and sabermetrics with applications.
- The structure and organization of the sports industry.
- The importance of media, fantasy sports, sport betting and e-sport.
- Topics in labour economics in the context of the sports industry, and
- Much More…
CHAPTER 1: A Brief History of North American Sport
1.1 The Organization of the Text
1.2 Stylized Facts Concerning North American Sports Leagues
1.2.1 Economic Size
1.2.2 A Summary of Broadcast Rights
1.2.3 Peripheral Economic Activity and Relative Size
1.3 A Brief History of the North American Leagues
1.3.1 Hockey
1.3.2 Basketball
1.3.3 Baseball
1.3.4 Football
1.4 League Functions
CHAPTER 2: Demand and Supply
2.1 Demand
2.1.1 The Demand Curve and Equation
2.1.2 Shift Factors for the Demand Curve
2.2 Supply
2.2.1 The Supply Curve and Equation
2.2.2 Shift Factors for the Supply Curve
2.3 Market Equilibrium
2.3.1 Price Adjustments: Shortage
2.3.2 Price Adjustments: Surplus
2.4 Analyzing Equilibrium Changes
2.5 Important Modifications to the Model
CHAPTER 3: Market Structures
3.1 Perfect Competition
3.1.1 Modelling Assumptions of Perfect Competition
3.2 Monopolistic Competition
3.2.1 Modelling Assumptions of Monopolistic Competition
3.2.2 Equilibrium in a Monopolistically Competitive Market
3.2.3 Efficiency Comparison
3.3 Oligopoly
3.3.1 Modelling Assumptions of Oligopoly
3.4 Monopoly
3.4.1 Modelling Assumptions of Monopoly
CHAPTER 4: A Closer Look – Monopoly with Applications
4.1 Applications of the Market Model
4.1.1 Consumer Surplus and Producer Surplus
4.2 Comparing Total Surplus in Perfect Competition and Total Surplus in a Monopoly
4.3 Price Discriminating Monopoly
4.4 Exclusive Territorial Rights and the Reserve Clause
4.5 Public Choice Perspective
4.6 Barriers to Entry
4.7 Antitrust
4.8 Antitrust Exemptions in Sport
CHAPTER 5: Econometrics and Sports – An Introduction
5.1 What is Econometrics? Why do we use it?
5.1.1 Uses of Econometrics
5.2 Regression Analysis
5.2.1 Dependent and Independent Variables
5.2.2 Single-Equation Linear Models
5.2.3 The Error Term
5.2.4 Standard Notation
5.2.5 Estimation
5.3 Regression Analysis: An Example
5.4 Coefficient of Determination
5.5 A Better Coefficient of Determination: Adjusted
5.6 Methodology and Statistical Significance
5.6.1 Step 1: Review the Available Literature and Formulate a Theoretical Model
5.6.2 Step 2: Specify the Model
5.6.3 Step 3: Hypothesize
5.6.4 Step 4: Collect the Data
5.6.5 Step 5: Estimate and Evaluate the Regression Equation
5.6.6 Step 6: Present the Results
CHAPTER 6: Performance Measures and ‘Sabermetrics’
6.1 Sabermetrics or SABRmetrics in MLB
6.1.1 WAR – Wins Above Replacement
6.1.2 Offensive Wins Above Replacement and Defensive Wins Above Replacement
6.2 The Production Possibility Frontier
6.3 Specialization and Gains from Trade
6.4 Corsi in the NHL
6.5 Player Efficiency Rating (PER) in the NBA
6.6 Quarterback (QB) Rating in the NFL
CHAPTER 7: Profit Maximization
7.1 Profit Motive
7.2 Standard Profit Maximization
7.2.1 Output Maximization
7.2.2 Cost Minimization
7.3 Sources of Revenue in Sports
7.3.1 A Closer Look at Sports Revenue
7.3.2 Home Game Ticket Sales
7.3.3 Local and National Broadcast Rights
7.4 Sources of Costs in Sports
7.5 Vertical Integration – Owning a Sport Franchise and a Media Outlet
APPENDIX TO CHAPTER 7: Examples of Profit Maximization (Duality)
7A.1 Known Values for (Output Maximization Example #1)
7A.2 Known Values for (Cost Minimization Example #1)
7A.3 Known Values for (Output Maximization Example #2)
7A.4 Known Values for (Cost Minimization Example #2)
7A.5 Duality of Production and Cost
CHAPTER 8: Game Theory in Sports
8.1 Game Theory
8.2 Solution Concept #1: The Elimination of Dominated Strategies
8.3 Solution Concept #2: Nash Equilibrium
8.4 Mixed Strategy Nash Equilibrium
CHAPTER 9: The Business of Sport
9.1 The Franchise Model
9.2 Single-Entity Leagues: MLS
9.3 Open System
9.4 Fantasy Sports and Sports Betting
9.5 E-Sports
9.5.1 E-Sports Leagues
9.5.2 E-Sports Tournaments
9.6 The All-or-Nothing Demand Curve
9.7 The Winner’s Curse
CHAPTER 10: Competitive Balance
10.1 Competitive Balance: Why does it Matter?
10.2 Maximum Parity is Economically Undesirable
10.3 Measures of Competitive Balance
10.3.1 Within-season Variation
10.3.2 Between-season Variation
10.3.3 An Alternate Use of the Hirfindahl-Hirschman Index (HHI)
10.4 Competitive Balance Initiatives
10.4.1 Reverse-Order Entry Draft
10.4.2 Luxury Taxes
10.4.3 Salary Caps
10.4.4 Revenue Sharing
10.4.5 Schedule Adjustments in the NFL
10.5 The Reserve Clause versus Free Agency
CHAPTER 11: Labour Economics in Sport
11.1 Labour Supply
11.2 Labour Supply with Fixed Hours
11.3 Labour Demand
11.4 Labour Market Equilibrium
11.5 A Monopsonist in the Labour Market
11.6 Labour Productivity and Training
CHAPTER 12: Labour: Unions and Collective Bargaining
12.1 Labour Revolution in Sports
12.2 Labour Unions
12.2.1 Craft Unions and Industrial Unions
12.2.2 Professional Tennis Associations
12.2.3 Bilateral Monopoly
12.3 Salary Arbitration
12.3.1 Final Offer Arbitration
12.3.2 Binding and Non-Binding Arbitration
12.4 Tournament Compensation
12.5 The Lorenz Curve
CHAPTER 13: Public Expenditure
13.1 Public Expenditure
13.1.1 Public Goods
13.1.2 Samuelson’s Allocation, Lindahl’s Pricing, and the “Free Rider” Problem
13.1.3 Sports Teams and Facilities as a Local Public Good
13.2 Externalities
13.2.1 Positive and Negative Externalities
13.2.2 Classification of Externalities
13.2.3 Social vs. Private Costs
13.2.4 Inefficiency of Externalities
13.3 Public Funding of Professional Sports Teams and Facilities
13.4 Social Cost – Benefit Analysis
13.5 Multiplier Effects
Corey Van de Waal is the oldest of seven children. He was born and raised in Woodstock, Ontario which is a small city in an otherwise rural southwestern portion of the province. Once he completed secondary school, Corey took a non-traditional path into academics. First, he spent more than twelve years working as an industrial baker before deciding that a new career was in order.
In 1999, at the age of (nearly) thirty-one, Corey enrolled as an undergraduate at the University of Waterloo. Since he was a mature student, early in his undergraduate studies he was often mistaken by his classmates as the course instructor. In 2004, Corey graduated on the Dean’s List with a degree in Applied Economics (co-op), a Management Studies minor, and a specialization in Public Policy.
Corey continued with his graduate studies at the University of Waterloo and specialized in Public Policy and Microeconomic Theory. In 2006, during the first year of his PhD, Corey was given the opportunity to teach an intermediate microeconomics class. That experience ignited his passion for teaching. In 2007, Van de Waal was the driving force behind the “Economics Clinic”; a place where first year and second-year economics students could visit to receive help with their foundational economics classes.
Corey was hired as a Continuing Lecturer in the University of Waterloo Economics Department in 2010. He began developing plans to create an economics of sport course for the curriculum immediately after he was hired. In 2013, those plans came to fruition with the inaugural offering of the course. Student reception for the class has been wildly positive.
Years of student feedback and their desire to know more about economics and the sports industry was the primary driver for this textbook.