Question: How do decision-makers in sports franchises use economics concepts? *T

Question

Question: How do decision-makers in sports franchises use economics concepts?

*This question is based on the material covered in "The Economics of Sports" by Peter von Allmen and Michael A. Leeds 5th edition. However, if you're not familiar with the Textbook any information would still be extremely helpfull.

What I would like to know basically is how sports franchises utilize economic structures, analysis, and concepts (i.e. ticket revenue, concessions, small market teams vs. large market teams, location, profit-maximization, etc) in their decision making.

Thank you!

Explanation / Answer

Sports franchises cosider sports match as market where there are many suppliers(franchise owners) and consumers(fans, spectators). Normally such market's hare is owned by few top franchises. Consumer's demand and preferences decies the location and price.

Since pricing is based on volume the aim to maximize sales/ revenue rather than concentrating on profit part. Such teams have regular fixed cost which will remain same irrespective of 1000 fans attending the match or 1050 fans attending the match.

Pricing is based on elasticty of demand of consumer on given location. If consumers have lower elasticty and greater demand, the prcing is high since people will not mind paying extra for tickets. The franchise can make greater revenue.

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