ECON 2P42 Study Guide - Midterm Guide: Price Discrimination, Vertical Integration, Pearson Education
Document Summary
1. discuss team goals and how they influence behavior (maximize profits or minimize wins)) 2. with reference to the following analyze revenues and operating income. a)licensing agreement b)venue revenue c)stadium deals d)distributional effects of revenue sharing e)vertical integration. 3. given the fact that most sporting organizations are local monopolies explain strategic pricing and price discrimination. Maximizing profits or wins: we usually assume that firms maximize profits. Sports teams and leagues are different because fans prefer wins to profits: different teams might have different goals. The kansas city royals seem to maximize profit. The new york yankees seem to maximize wins. The two goals can be traded off. Maximizing profits: profit is the difference between r and c pi = r(wi) c(wi) Revenue (r) increases with wins (w) but at a decreasing rate. Fans do not want to see a team win all the time. For simplicity, we assume that costs rise linearly.
