Monday, May 10, 2004
Does Ballpark Revenue Buy Better Players?
Clemson economics professor Skip Sauer, who runs The Sports Economist Weblog, asks the question most important to fans, and other residents, asked to finance a new ballpark -- whether the club's owner will in fact use the added revenue to improve the club.
To answer the question, Sauer links to a new paper [.PDF link] by Jahn Hakes and Chris Clapp that discusses the "honeymoon effect" of a new ballpark. Hakes and Clapp find that new ballparks produce a 1/3 jump in attendance during the first year at the new facility, but also conclude:
Craig Depken of the University of Texas-Arlington has looked at the related issue of what happens to the money clubs receive when they sell naming rights. His conclusion: "The owners are putting the difference in their pockets."
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Clemson economics professor Skip Sauer, who runs The Sports Economist Weblog, asks the question most important to fans, and other residents, asked to finance a new ballpark -- whether the club's owner will in fact use the added revenue to improve the club.
"[W]ill these revenues be spent on increasing the team's talent? Economics implies they will only if the new stadium increases the revenues from winning additional games. If this effect is absent - i.e. if nicer accommodations and a more competitive team are not complements - then a profit maximizing owner will just pocket the cash and the composition of the team will be unchanged."
To answer the question, Sauer links to a new paper [.PDF link] by Jahn Hakes and Chris Clapp that discusses the "honeymoon effect" of a new ballpark. Hakes and Clapp find that new ballparks produce a 1/3 jump in attendance during the first year at the new facility, but also conclude:
"Contrary to expectations, there is no systematic interaction between new venues and team performance upon attendance or stadium revenues. This noncomplementarity implies that a profit-maximizing team owner would not use a new stadium's revenue stream to increase quality of play."
Craig Depken of the University of Texas-Arlington has looked at the related issue of what happens to the money clubs receive when they sell naming rights. His conclusion: "The owners are putting the difference in their pockets."
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