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Inelastic Sports Pricing

Rodney Fort
Managerial and Decision Economics
Vol. 25, No. 2, Sports Economics (Mar., 2004), pp. 87-94
Published by: Wiley
Stable URL: http://www.jstor.org/stable/25151279
Page Count: 8
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Inelastic Sports Pricing
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Abstract

A recurrent finding in estimates of the gate demand for sports events is pricing in the inelastic portion of demand. With few exceptions, this finding has either been ignored or (rather poorly) explained away. In this paper, the recurrent outcome is detailed and the explanations given by past authors are discussed. Then, profit maximization theory is explored for its inelastic pricing implications. It ends up that the local TV revenue relationships between MLB teams satisfy the situation that theory predicts would generate inelastic gate pricing. This suggests two things. First, inelastic pricing is consistent with profit maximizing team behavior. Second, fuller specification of revenue functions will enhance future work in the area.

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