ECN729 Sports Economics Instructor: Esmond Lun Semester: Fall 2023 Assignment 1 Submission of assignments are done on D2L by going to Assessments =⇒ Assignments and submitting to the corresponding folder. Please submit your assignments in PDF format. Each question is worth 10 marks. Late assignments are not accepted and will receive a grade of zero. Question 1 The coach of the University of Minnesota’s Golden Gophers, Glen Mason, was fired after his team blew a 31-point lead in the 2006 Insight Bowl. The firing came one year after Mason received a 4-year, $6.6 million contract extension. The buyout cost for the University of Minnesota was $4 million. Provide an economic analysis of the University of Minnesota’s decision to fire Mason. Question 2 Before the 2007 season, the Chicago Cubs spent a lot of money on free agents. For example, they spent 8-year, $136 million for Alfonso Soriano, 3-year, $21 million for Jason Marquis, and 4-year, $40 million for Ted Lilly. The total payroll increased by $20 to $30 million. Since player salaries are fixed costs, ticket prices should not have risen as a result of the increased payroll, yet ticket prices did rise. What happened here? Question 3 Some economists have argued that leagues expand strategically to prevent the formation of rival leagues, but expansion of any business enterprise occurs in response to new (profitable) opportunities. How can we tell the difference between strategic expansion to prevent entry and profit maximizing expansion? Question 4 In professional tennis, there is a dominance of a small group of players. For the men, the “Big 4” of Roger Federer, Rafael Nadal, Novak Djokovic, and Andy Murray dominated by winning most of the majors and remaining at the top of the world rankings. For the women, Steffi Graf, Martina Navratilova, and Serena Williams all spent over 300 weeks as the world number 1 in the rankings. Chris Evert and Martina Hingis both spent over 200 weeks at the top. Does this indicate an absence of competitive balance on the ATP and WTA tours? Question 5 Suppose you are desperate to see the Toronto Blue Jays take on the New York Yankees in Toronto at the Rogers Center (Skydome) but you do not have a ticket and the game is sold out. Another person purchased a ticket online for $100. You are willing to pay up to $250 for a ticket and the other person is willing to sell the ticket for $250. If 1 the other person sells you their ticket, are they guilty of scalping? Explain. Is social welfare improved by the other person selling you the ticket? Explain. Should the transaction be prohibited? Explain. 2
