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Public Subsidies and the Location and Pricing of Sports

Philip K. Porter () and Christopher Thomas ()
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Philip K. Porter: Department of Economics, University of South Florida, 4202 East Fowler Avenue, BSN 3403, Tampa, Florida 33620, USA

Southern Economic Journal, 2010, vol. 76, issue 3, 693-710

Abstract: Using public choice analysis, we determine how government subsidies affect location and pricing decisions of sports teams. We explain how voter referendums can create suboptimal outcomes for local communities and identify winners and losers in sport team subsidies. Subsidy bidding leads to higher subsidies and fewer sport franchises but does not alter team location. Sport subsidies generate additional revenue for owners and players at taxpayer expense, and non-fan taxpayers subsidize both the team and fans. To increase political support for subsidies, teams lower ticket prices below the apparent profit-maximizing level, which may cause inelastic ticket prices and ticket shortages.

JEL-codes: D72 H25 L83 (search for similar items in EconPapers)
Date: 2010
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http://dx.doi.org/10.4284/sej.2010.76.3.693

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