Economics 320: Economics of Sports and Entertainment
Professor Mike Haupert
403V North Hall
785-6863
haupert.mich@uwlax.edu
office hours: MWThF 10-12, and by appointment
Required Texts:
Leeds and von Allmen (LvA), The Economics of Sports
Haupert (MH), The Entertainment Industry
Additional readings will be distributed during the semester.
Course Description: Economic analysis will be used to study the sports industry. We
will focus on various topics of the industry including the demand for sports, the economic
impact of sports franchises, labor markets, sports and the media, public financing of
stadiums, and college sports.
Course Requirements: You are expected to attend every class, complete all reading
assignments before we discuss the material they cover, complete all homework
assignments on time, and participate in class discussions. If you do all of this, the class
will be rewarding, enlightening, engaging, and intellectually stimulating. If you do none
or only part of this, your experience is likely to be tedious, boring and irrelevant.
Grading: Grades will be determined by a number of activities, and will be curved on the
basis of total semester points earned. The major assignments, which will be discussed at
length later in the semester, are listed below. Some are group projects that may be
completed with two to three people per group, with each person in the group receiving
the identical grade. The economic impact project will also be presented to class. A
separate grading rubric for the presentation will be handed out later in the semester.
Presentations should be five to ten minutes in length. There will be weekly quizzes
related to the material covered during the week. There will be guest speakers throughout
the semester. You will be expected to provide a critical analysis of their presentation in
the form of a one to two page essay. Two exams will be given, each covering
approximately half of the semester. All assignments will be accepted up to 24 hours after
the due date for half credit. Beyond that no credit will be given.
Babe Ruth project: In this assignment your group will use historical data with modern
economic theory to make a recommendation on whether or not the Yankees should agree
to the purchase of Babe Ruth from the Red Sox along with the financial rationale for your
decision.
Sports franchise simulation: In this simulation your group will purchase a sports
franchise, make financial decisions regarding its operation, and then pit your decision
making abilities against those of your classmates to see how well your franchise
performs.
Labor market analysis: The assignment will consist of using primary contract data,
creating a spreadsheet, merging it with performance data and then analyzing the
relationship between pay and performance.
Economic impact analysis: Your group assignment is to estimate the economic impact
of a specified athletic event on a target city. You will estimate the cost of putting on the
event and the expected revenues as well as defining the geographic area in which you
will be measuring costs and benefits. Your final analysis will be presented to the class as
an oral presentation.
Grade Disputes: If you disagree with a grade you receive on any exam or assignment,
you may appeal the grade, in writing (typed, double-spaced) within 24 hours of the time
that I initially return the item to the class. If you choose to appeal a grade, keep in mind
that the entire exam or assignment may be regraded, not just the disputed item.
Eco 320: Tentative Syllabus
Week 1 (MH Ch 1, 8)
Introduction
The Economics of the Leisure Industry
Assignment: leisure survey
Week 2 (LvA Ch 1-2)
Economics and the Sports Industry
Estimating the Demand for Professional Baseball
Assignment: The Babe Ruth Project
Week 3 (LvA Ch 3)
Professional Sports Franchise Profit Maximization
Assignment: sports franchise simulation
Week 4 (LvA Ch 4)
Sports and Monopoly
Week 5 (TBA)
Sports and the Media
Week 6 (LvA Ch 5)
The Competitive Balance Issue
Assignment: competitive balance
Week 7 (LvA Ch 8)
Labor issues I: The Value of an Athlete
Week 8 (LvA Ch 9)
Labor issues II: What do they pay these guys for anyway?
Assignment: player wages
Week 9 (LvA Ch 10)
Labor issues III: Discrimination in Sports Labor Markets
Week 10 (LvA Ch 6)
Stadiums and Public Finance
Assignment: franchise movement
Week 11 (LvA Ch 7)
The Economic Impact of Sports
Assignment: economic impact
Week 12 (LvA Ch 11)
Unpaid Professionals: College Athletics
Week 13 (TBA)
The Economics of the College Football Bowl System
Assignment: a cost benefit analysis of the stakeholders in an NCAA football
championship
Week 14
Presentations
Brief Overview of Major Assignments
Babe Ruth project
Prepare a memo to the Yankees front office that recommends accepting or rejecting the
offer to purchase Babe Ruth from the Red Sox. Include a financial rationale for your
decision. Remember, your decision should be made from the vantage point of December
1919, not today. In retrospect, it is easy to say the Yankees made the right decision in
purchasing Ruth. At the time of the sale, what reasonable expectations could the team
have had concerning the impact Ruth might have on the Yankees’ finances? Support
your recommendation by justifying your expectations of Ruth’s performance and its
impact on the Yankee bottom line. This is very important. Be sure you can justify all
projections you make: where did you come up with the figures, how did you make your
estimations/calculations?
Sports franchise simulation
The purpose of this game is to help you better grasp the basic concepts of running a
professional sports franchise. It is a simple exercise but should help convey the
fundamental choices and constraints faced by the owner of a professional sports
franchise. In order to succeed in this game you will need to balance the marginal
benefits, both in terms of wins and revenue, against the marginal costs of improving your
team. In addition, you will experience the role that chance plays in the success of a
professional sports team, especially in a league with a short regular season. Extensions of
the basic game help illuminate the dynamics of revenue sharing, television contracts,
salary caps, and franchise relocation. As an owner, you will bid on a franchise and select
the level of “talent” for your team. Talent is represented by a random number function
that you will choose. This random number function will determine the number of points
your team scores each week. The higher the quality level of the talent on your team, the
more likely you are to score a high number of points and win your game. You will be
allowed to adjust your initial talent level via cash transactions with other league owners.
You may buy and/or sell talent in any quantity from any of the other owners.
Competitive balance
Choose any sport other than baseball and discuss competitiveness in that sport. You will
need to specify how you define competitiveness and how you plan to measure it. Has it
changed over time? If so how? If not, why not? You will need to supply evidence to
support your position. The next section of your paper should discuss in detail how you
measure competitiveness and then lay out the measure. Finally, what is your analysis of
the current state of the sport? Is the level of competitiveness changing in a way that is
detrimental to the sport or league? Has it remained unchanged from an unacceptable
prior level? Or is it perfect? If there were room for improvement, what would you
suggest?
Player wages
For this assignment you will use primary contract data, create a database, merge it with
performance data, combine your data with that of other class members, and then analyze
the relationship between pay and performance using simple OLS regression techniques.
The assignment has two parts: create a dataset, and analyze the data. You will each be
responsible for a subset of the whole data set. Once you have created your data set,
forward it to me, and I will combine all spreadsheets and return a complete set to each of
you. You will then use the entire dataset, as collected by the class, for the analysis
portion of the assignment.
Franchise movement
This is an assignment in which you will determine the marginal costs and benefits of a
professional team relocating to a new market. For your analysis you may consider a
franchise in any professional team sport. Since this assignment focuses on relocation,
you must choose a team that has relocated at some time in the league’s history. The basic
question you are to answer is why the team moved. Consider the market it vacated and
the market into which it moved. What were the benefits and costs of leaving the one
market and what were the benefits and costs of moving into the new market? Not only
should you be able to identify the costs and benefits, but make an attempt to estimate
their value.
Economic impact
An oral presentation of your work will be made during the last week of class. You must
work with one or two others on this project. No event may be presented by more than
one group. Events will be assigned on a first-come-first-served basis. You will make
your presentations in the same order they are chosen. Time your presentation for eight to
ten minutes. Your assignment is to estimate the economic impact of your event on the
city. Use the tools we discussed and analyzed in class. You must be prepared to defend
any assumptions that you make. Estimate the cost of putting on the event and the
expected revenues. Be sure to define the geographic area in which you will be measuring
costs and benefits. Your grade will be determined in three parts: your presentation on
form and content; you will grade your teammates’ effort; and you will grade your fellow
classmates on presentation quality and believability of their argument. I will distribute
grading rubrics the week before presentations.