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Microeconomic Theory of Small-Market Sports Teams


Today, one continually is informed by the various media outlets that so-called small-market teams cannot compete in the top-level leagues of the several commercial sports. The microeconomic theory generally used to support this contention involves (a) differences in demand for the product between cities with different population sizes and (b) variations in the capacity of cities of different size to respond the demands with changes in supply.

When charted, the demand curve for larger cities in relation to commercial sports products is expected to be to the right of the demand curve for smaller cities. Because larger cities have more people than smaller cities, more people will demand (a) more tickets to the ballparks, (b) more live broadcasts of games on television and radio, and (c) more team memorabilia. The level of demand, however, tends to be tempered by the success of teams on the field, on the floor, or on the ice. Thus, commercial sports franchises compete for the best talent that they can afford to maintain demand.

Commercial sports franchises, continuing to follow this line of logic, vary in their capacity to respond to demand. Franchises located in larger cities, other factors remaining equal, can demand higher level of compensation from broadcasters for television and radio rights to present their games. Franchises with more successful teams also can charge higher prices for tickets to the ballparks without dampening demand.

When all is said and done, the expectation is that commercial sports franchises located in larger cities will have more money to compete for a relatively limited supply of top flight players for their teams. The argument is that the franchises with the most money will be able to acquire the best players from a supply pool wherein increasing the available supply of top flight players is not as easily accomplished as is the case wherein...

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Microeconomic Theory of Small-Market Sports Teams. (1969, December 31). In Retrieved 09:28, February 19, 2017, from