2008-05-10 papers

on Sports and Economics

Issue of 2008–05–10
two papers chosen by
Humberto Barreto, DePauw University

Estimating Local Welfare Generated by a Professional Sports Team: An Application to the Minnesota Vikings under Threat of Relocation By John R. Crooker; Aju J. Fenn
Exploring the Incentive Structure of NASCAR Events By Christopher Azevedo; John R. Crooker

Estimating Local Welfare Generated by a Professional Sports Team: An Application to the Minnesota Vikings under Threat of Relocation

By:	John R. Crooker (University of Central Missouri); Aju J. Fenn (The Colorado College)
Abstract:	The issue of public financing for a professional sports team is one that has seen vigorous debate in the state of Minnesota. This study offers the opportunity to examine the welfare contribution of the Minnesota Vikings to Minnesota households in the context of a credible threat to team relocation. We find the credibility of relocation is essential to providing unbiased estimates of welfare. This study utilizes contingent valuation methodology (CVM) and a random utility model (RUM) to analyze Minnesotans’ decision-making mechanisms for supporting a new stadium initiative. While previous studies have attempted to measure the welfare associated with a sports franchise, we develop and discuss bias that may be imparted to estimates when the researcher fails to calculate a choke price. Further, we develop an unbiased approach to identify welfare when respondents perceive a risk of losing the franchise. Our study suggests a 95% confidence interval on the welfare contribution of the Vikings to households in Minnesota is $435.4 million to $1,499.1 million.
Keywords:	Stadium Costs, Sports Economics, Contingent Valuation, Random Utility Model
JEL:	H41 L83
Date:	2008–05
URL:	https://d.repec.org/n?u=RePEc:umn:wpaper:0805

Exploring the Incentive Structure of NASCAR Events

By:	Christopher Azevedo (University of Central Missouri); John R. Crooker (University of Central Missouri)
Abstract:	The existing literature on the incentive structure of NASCAR events has focused on the apparent "NASCAR Exception," which refers to the relative flatness of the finishing order monetary payouts in NASCAR events compared to other sporting events. This apparent exception to standard tournament theory is motivated as a result of the high penalty for accidents in racing events compared to other tournament events such as professional golf, where the first place finisher often receives a payout that is many times larger than lower finishers. In this paper, we develop a game theory model that suggests a flat monetary award structure with bonus points and contingency awards yields the same aggressive driving behavior as a simple disproportionate monetary award structure. The degree of steepness of the monetary award structure does not matter by itself. We use empirical data from NASCAR races over the last three decades to test the implications of the model and find no statistical evidence of a flat monetary award structure impacting driving behavior.
Date:	2008–05
URL:	https://d.repec.org/n?u=RePEc:umn:wpaper:0802

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