Age and Performance Under Pressure

This article explores how well an individual manages his or her own talent to achieve high performance in an individual sport. Its setting is the Ladies Professional Golf Association (LPGA). The order-m approach is explained. Additionally, the data and the empirical findings are presented. The inputs measure fundamental golfing athletic ability. The output measures success on the LPGA tour. The correlation coefficient between earnings per event and the ability to perform under pressure is 0.48. The careers of golfers occur on the front end of the age distribution. There is a classic trade-off between the inevitable deterioration in the mental ability to handle the pressure and experience gained with time. The ability to perform under pressure peaks at age 37.

Event Analysis

This article investigates the theory and application of event studies in sports. It briefly explains what event analysis is, when it is appropriate, and what it does. It also presents a brief history of event analysis in the finance literature. It then discusses how to perform an event analysis. It presents both the standard methodology from the finance literature and an approach that sports economists are likely to find more intuitively appealing. Many papers that have applied event analysis to the realm of sports are summarized. An event analysis requires a clearly identified incident that takes place at a well-identified moment in time. It has illustrated that event analysis is a potentially valuable econometric tool. However, it has not been extensively employed in sports settings and, when used, it has often been imperfectly applied.

Multiplier Effects and Local Economic Impact

This article investigates the multiplier model in the context of the local impact of expenditures on sports infrastructure. There are two fundamental reasons for the lack of empirical evidence of large multiplier effects: inflated estimates of the direct effects, or the “base” increase in spending; and leakage from the local economy that diminishes the multiplier. The appropriate base expenditure of hosting a team in a city is the net new spending on local incomes and businesses plus local taxes paid. The effect of tax rates on the multiplier is less ambiguous. The full-time employment benefits are small, as the ratio of part-time to full-time employment is roughly ten to one. The role of government in stimulating economic growth has always been the subject of debate in macroeconomics. Local economic impact studies argue that stadium projects and playing host to a professional sports team are legitimate engines of economic growth.

The Economics of Discrimination

This article replicates for hockey what others have done for baseball and basketball, with the interesting exception that alleged discrimination in hockey falls along the lines of language and national origin rather than along racial grounds. The National Hockey League (NHL) essentially has three minority groups: Americans, Europeans, and French Canadians. The focus in the discrimination literature has been on French Canadians, and, to a lesser extent, Europeans. It is reasonable to suggest that Canadian fans and media have a much stronger sense of “ownership” of the game of hockey than what is found in the United States. There have also been economic changes that have occurred in recent years that should work to decrease any possible discrimination. While the NHL has historically had the least amount of voluntary player mobility, the most recent collective bargaining agreement signed in 2005 provides for a much more liberalized system of free agency.

Frontier Models and Their Application to the Sports Industry

This article presents an extensive discussion of stochastic frontier “effects” models, which analyze factors influencing efficiency. The recent literature on team sports efficiency is also addressed. It offers an overview of the stochastic frontier model and equations for general models. It then compares various models that may be useful in analyses of determinants of efficiency and the effects models. The methodologies for inference within team efficiency estimation are explained. Additionally, a more detailed discussion of frontier models with time-varying efficiency is shown. The confidence interval from the percentile bootstrap should be precise enough for panel data with sufficiently large time-series observations because a bias problem is less likely. The discussion of the selection of input variables revealed that team playing talents can be decomposed into positional playing talents that have different roles in the process of producing output (producing wins).

Salary Dispersion and Team Production

This article explores the issue of salary dispersion and its effect on productivity. It uses salary and performance data from the National Hockey League (NHL) to distinguish between the theoretical alternatives, thus weighing in on an important issue in labor economics and industrial relations. In addition, it describes the intuition behind the two competing hypotheses. It follows with a discussion of the empirical model and the data used to test the “tournament” versus “fairness” hypotheses. The empirical results are elaborated. The relatively larger payrolls lead to greater team performance. The empirical results clearly and strongly support the “fairness” model when using conditional salary dispersion measures.

Location, Location, Location?

This article explores the location of franchises in sports leagues. It specifically examines the location of franchises within the four major sports leagues in the continental United States: Major League Baseball (MLB), the National Football League (NFL), the National Hockey League (NHL), and the National Basketball Association (NBA). Moreover, a facility location model is used to investigate the optimal placement of sports franchises in a league and to identify the best expansion prospects for a sports league. It is shown that the p-median model's optimal solution is less likely to be the best option for an organization if its facilities are less dependent on the income available at a node on the network. It is noted that the four major sports leagues in the continental United States do not all locate franchises optimally, according to the model.

Demand for Attendance

This article explores several additional concerns about the estimation of an attendance demand function. In particular, it highlights that there are multiple prices and multiple categories of consumer with potentially different demand elasticities to consider in the set of those in attendance at a specific game. It also emphasizes that price is likely to be endogenous when a longer run perspective is taken. The possible effect of changes in team ownership structures in accounting for departures from profit maximization and the complications to the price-attendance relationship posed by such ancillary factors as customer-based discrimination are elaborated. Overall profit maximization and inelastic ticket pricing are by no means incompatible. Inelastic ticket pricing can itself still be consistent with long-term profit maximization or maximization across other revenue streams, such as television fees or concessions earnings. Data limitations seem unlikely to allow any irrefutable measures of price and attendance relationships.

Contingent Valuation of Sports

This article takes up the task of using surveys to quantify ex ante the value of a public investment project that offers both an excludable benefit stream and an intangible, subjectively valued benefit stream. It specifically describes the use of the Contingent Valuation Method (CVM) to conduct such surveys and to analyze the data to measure the benefits produced by sports public goods. The Lexington survey showed the feasibility of using the CVM to estimate willingness-to-pay for sports public goods, but left unanswered the question of how much major league sports public goods are worth. Pittsburgh's civic pride in its major league status would be intact if the Penguins left, since the city also hosts baseball's Pirates and football's Steelers. Conducting a CVM survey offers an opportunity to ask questions to allow stated preference methods other than CVM to be employed to inform public policy related to sports.

Demand, Attendance, and Censoring

This article addresses the censoring of the data that comes about because of capacity constraints on game-day attendance. Using high-quality data about National Football League (NFL) attendance, it explores why and shows how a Tobit estimation technique is superior to OLS for testing propositions about price and demand shift variables in the context of the demand to attend sporting events. The OLS results are almost uniformly lower, in absolute terms, than those produced when the censoring is explicitly recognized. In addition, the marginal significance of several of the variables differs across the two. It is found that game-day attendance in the NFL depends negatively on time and positively on the perceived competitiveness and scoring output of the game. It also increases when the team plays a division rival or when the game is played on Thanksgiving.