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Brock University
Department of Economics
ECON 2P42
Economics of Professional Sports
Fall 2018
Instructor:
Office location:
Phone:
Lecture:
Course Contact:
R. Koehn (no email)
PL436
905-688-5550, ext. 3104
Monday & Thursday – 2:00 to 3:30 pm – STH204
Indra Hardeen – ihardeen@brocku.ca
Office location – PL454
Office hours – TBD
General Information about the Course:
Economic analysis is applied to selected aspects of professional sports. The emphasis is on the
economics so we will not be watching or playing any sports. But all of the analysis is applied to
sports so some institutional detail on sports teams, leagues, players etc. is covered. Further,
almost all of the examples and applications are taken from professional sports.
The field of Sports Economics is very new and growing rapidly. Consequently, there is no
consensus about what should be taught in a sports economics course, it is a learning experience
for the instructor as well as the students, and the course changes from year to year. The topics
covered and their sources will almost surely be modified as the course evolves through the term.
ECON 1P91, Principles of Microeconomics, is a prerequisite for the course so knowledge of first
year level principles of microeconomics is assumed. Use any intro level microeconomics text to
fill in any gaps you may have. Wikipedia http://en.wikipedia.org/wiki/Economics can also be helpful.
Knowledge of the basic rules of the major professional sports (baseball, American football, and
basketball especially; but also hockey, European football or soccer, tennis, and golf) is also
assumed. For American football and baseball, sources are http://en.wikipedia.org/wiki/American_football#Rules
and http://en.wikipedia.org/wiki/Baseball. Sources for other sports are also available on the internet.
References:
There is no assigned textbook. Course content is taken mainly from the following sources which
are available in the Library. Other sources are cited on the lecture notes.
Blair, Roger D. Sports Economics NY: Cambridge University Press, 2012 GV 716 B53 2012
Fort, Rodney. Sports Economics, Second edition. N.J.: Pearson Prentice Hall, 2006 GV716F68
Késenne, Stefan. The Economic Theory Of Professional Team Sports : An Analytical Treatment
Cheltenham, UK, Northampton, MA : Edward Elgar, 2007. GV 716 K47 2007
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Leeds, Michael and Peter von Allmen. The Economics of Sports, Fourth edition, Addison
Wesley, Boston, 2010. GV 716 L44 2011. (L&vA) Some supporting materials are at:
http://wps.aw.com/aw_leedsvonal_econsports_4/ including a nice collection of links.
Winston, Wayne. Mathletics: how gamblers, managers, and sports enthusiasts use mathematics
in baseball, basketball, and football, Princeton, NJ : Princeton University Press,
GV 706.8 W56 updated edition, 2012
Zimbalist, Andrew. The bottom line : observations and arguments on the sports business.
Philadelphia, PA : Temple University Press, 2006. GV 716 Z56 2006
Course Content:
Topic 1: Some economics basics
• The cost of something is what you have to give up to get it: opportunity cost
• Thinking at the margin, including opportunity costs, to best allocate scarce resources
• But you should ignore sunk costs when making decisions
• People/teams respond to incentives
• Willingness to pay, demand, consumer surplus, supply
• Scalping tickets
Topic 2: Public money for teams, stadiums, and events
• Subsidy of, and Extortion by, sports teams and events (e.g. the Olympics)
• Why subsidize professional sports (including the Olympics)? Market failure:
public goods, externalities, economic development
• Skydome, Rogers Centre case study
Topic 3: Objectives of teams: Profit or Wins?
• Effects of market size,
• Effects of salary caps, salary minimums, and the MLB luxury tax
Topic 4: Demand and the basic profit maximizing, monopoly model of ticket pricing
• Revenues, costs, basic monopoly model of ticket pricing, consumer surplus
• Effects of capacity constraints
• Players’ salaries and ticket prices
Topic 5: Competition (or not): models, legal framework, recent history
• Profits and entry: Closed league versus open league with promotion and relegation
• Competition law and anti-trust (or not) in professional sports
• Natural monopoly
Topic 6: Determinants of revenue and demand, Revenue Sharing
• Basic Economics 101 determinants of demand
• Promotions, quality of the team and opposition, dynamic pricing
• Revenue sharing in the major sports
• Effects of revenue sharing: good and bad, intentional and unintentional
Topic 7: Labour markets and players’ salaries
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Marginal product and the value of wins
Salaries and the reserve clause again
Topic 8: What do leagues do?
• Competition versus cooperation, “peculiar economics” allocating profits or losses
• Advertising externalities and public goods
• When to admit a new team into the league. Case Study: the NFL in Toronto
Topic 9: Competitive Balance (or not)
• Costs and benefits
• Polices to promote competitive balance
Topic 10: More complex models of pricing and profits I: Vertical Integration and Transfer
Pricing
Topic 11: More complex models of pricing and profits II: Price discrimination
Topic 12:
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Baseball analytics
States, probabilities, expected runs and the probability of scoring
Analyzing sacrifice bunts, stolen bases, taking the extra base
Basic baseball statistics and their relation to scoring runs (or not)
Measuring batter’s productivity: OPS, variations on OPS, James’ Runs Created and
batting order, park effects, OPS+
Topic 13: Analysis and optimal strategies: American Football Analytics
• States and expected points
• Analyzing the true value of touchdowns and field goals, the value/cost of turnovers,
and going for it on fourth down
Topic 14: Prisoner’s dilemma and the use of performance enhancing drugs (doping)
Evaluation:
Mid-term test* – October 25
Assignment – due date: November 29
Final exam
35%
15%
50%
* If for whatever valid reason the midterm examination is missed, the corresponding weight will
be transferred to the final examination. It is your responsibility to inform Indra Hardeen of your
absence prior to the midterm examination taking place.
Last day to withdraw without academic penalty: Nov. 6, 2018
Classroom Protocol:
No talking during lectures. Students’ most common complaint about large courses is other
students talking. If you are talking, you ARE bothering the other students around you. They
are just being too polite to tell you. The instructor knows this because students thank him in the
course evaluations for telling students to shut up. Same for watching videos during class. The
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instructor doesn’t care as long as you are quiet, but it is very distracting to the students behind
you.
Academic Integrity:
Statement for undergraduate courses
Academic misconduct is a serious offence. The principle of academic integrity, particularly of doing
one’s own work, documenting properly (including use of quotation marks, appropriate paraphrasing
and referencing/citation), collaborating appropriately, and avoiding misrepresentation, is a core
principle in university study. Students should consult Section VII, “Academic Misconduct”, in the
“Academic Regulations and University Policies” entry in the Undergraduate Calendar, available
athttp://brocku.ca/webcal to view a fuller description of prohibited actions, and the procedures and
penalties.
Plagiarism software:
If plagiarism software is used (Turnitin.com), a statement to that effect must be included on the
outline including an option to opt out.
Sample statement regarding Turnitin.com
This course may use Turnitin.com, phrase-matching software. If you object to uploading your
assignments to Turnitin.com for any reason, please notify the instructor to discuss alternative
submissions.
Intellectual Property Notice:
All slides, presentations, handouts, tests, exams, and other course materials created by the instructor
in this course are the intellectual property of the instructor. A student who publicly posts or sells an
instructor’s work, without the instructor’s express consent, may be charged with misconduct under
Brock’s Academic Integrity Policy and/or Code of Conduct, and may also face adverse legal
consequences for infringement of intellectual property rights.
Special Accommodation:
The University is committed to fostering an inclusive and supportive environment for all students
and will adhere to the Human Rights principles that ensure respect for dignity, individualized
accommodation, inclusion and full participation. The University provides a wide range of resources
to assist students, as follows:
a) If you require academic accommodation because of a disability or an ongoing health or mental
health condition, please contact Student Accessibility Services ataskSAS@brocku.ca or 905 688
5550 ext. 3240.
b) If you require academic accommodation because of an incapacitating medical condition, you
must, as soon as practicable, inform your instructor(s) of your inability to complete your academic
work. You must also submit a Brock University Student Medical Certificate (found
at https://brocku.ca/registrar/toolkit/forms). The University may, at its discretion, request more
detailed documentation in certain cases. If you are unable to write a scheduled examination due to
an incapacitating medical condition, you must follow the process set out in the Faculty Handbook
III:9.4.1.
c) If you are experiencing mental health concerns, contact the Student Wellness and Accessibility
Centre. Good2Talk is a service specifically for post-secondary students, available 24/7, 365 days a
year, and provides anonymous assistance:http://www.good2talk.ca/ or call 1-866-925-5454. For
information on wellness, coping and resiliency, visit: http://brockmentalhealth.ca/mental-wellbeing/.
d) If you require academic accommodation on religious grounds, you should make a formal,
written request to your instructor(s) for alternative dates and/or means of satisfying requirements.
Such requests should be made during the first two weeks of any given academic term, or as soon as
possible after a need for accommodation is known to exist.
e) If you have been affected by sexual violence, the Human Rights & Equity Office offers support,
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information, reasonable accommodations, and resources through the Sexual Violence Support &
Education Coordinator. For information on sexual violence, visit Brock's Sexual Assault and
Harassment Policy or contact the Sexual Violence Support & Response Coordinator
at humanrights@brocku.ca or 905 688 5550 ext. 4387.
f) If you feel you have experienced discrimination or harassment on any of the above grounds,
including racial, gender or other forms of discrimination, contact the Human Rights and Equity
Office at humanrights@brocku.ca.
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