This Document Contains Chapters 6 to 11 Chapter Six Study Questions The Economic Value of Playing Talent 1. What is the purpose of tracking player statistics in team sports? Answer: We can see which teams win and lose. Statistics are tracked to see which players are responsible for this outcome. So statistics are tracked to separate the player from the player’s teammates. 2. When did the first baseball box score appear? Who developed batting average, and when was this introduced? Answer: The first box score appeared in 1845. Batting average was developed by H. A. Dobson in 1872. 3. According to Pete Palmer, what is the first objective of a hitter? Answer: The first objective is to not make an out. 4. According to the Asher Blass model, what is the relative value of a single, double, triple, and home run in baseball? Answer: A double is slightly more valuable than a single (not nearly twice as valuable). A triple is about twice as valuable as a single, while a home run is nearly three times as valuable (not four times as valuable). 5. Which is the “better” measure of a pitcher’s production: ERA or K/BB (and what are they)? Answer this question by referring to the work of Anthony Krautmann, Andrew Zimbalist, and J. C. Bradbury. Answer: Krautmann and Zimbalist argued that earned run average (ERA) does better than strikeout-to-walk ratio (K/BB) at explaining runs. But Bradbury noted that ERA is not a very good measure of a pitcher’s performance because it depends on the defensive players around the pitcher. This was illustrated by noting the relative inconsistency of ERA. Bradbury argued that a better measure is K/BB because this measure is more about the pitcher’s skill. 6. Relative to baseball players and hockey goalies, how consistent are basketball players from season to season? What explains this consistency? Answer: Basketball players are much more consistent than baseball players or hockey goalies. This goes back to the “short supply of tall people.” Because the population of potential basketball players is small, the differences in athletes are relatively large and more consistent across time. 7. According to Bill Gerrard, what is a “complex invasion sport”? What are examples of this kind of sport? Answer: Gerrard argued that a complex invasion sport is one where group of players cooperate to move an object to a location defended by opponents. Examples include soccer, hockey, basketball, and American football. 8. Why is it difficult to statistically model a complex invasion sport? What happens if you ignore the nature of complex invasion sports and simply attempt to estimate the impact of every player statistic in a single equation? Answer: Complex invasion sports have a hierarchal nature, where higher-level actions (i.e., scoring) depend on lower-level actions (turnovers, passing, etc.). If your model already notes the higher-level action (i.e., scoring), then the lower-level actions will generally appear to be statistically insignificant because the impact of the lower-level actions is already captured by the higher-level action. Hence you need multiple equations to capture the impact of both higher- and lower-level actions. 9. Do NBA players really “create” shots? Explain. Answer: Players do not seem to “create” shots. The number of shots taken by a team is not impacted by the loss of a player who takes many shots (e.g., Allen Iverson or Carmelo Anthony). What we see in the data is that scorers actually just take shots from their teammates. 10. What is Gerald Scully’s method for measuring MRP? Answer: Scully argued that you need to estimate two models. One of these connects the player statistics to wins. This allows one to measure how many wins a player creates. A second model connects team revenue to team wins. This allows one to measure the dollar value of an additional win created. 11. How do fixed revenues (define) impact our ability to measure the MRP of athletes in basketball and football? Answer: Fixed revenues are revenues that do not change with outcomes. An example is broadcasting revenue, which a team receives whether it wins or loses. Players are clearly paid more when broadcasting revenue rises. But according to the Scully approach, the player’s MRP cannot rise with more broadcasting revenue because wins do not impact broadcasting revenue. So when fixed revenues are large, it will appear that players are generally overpaid. 12. What is a simpler approach to addressing the issue of whether players are overpaid or underpaid? What does the simpler approach tell us about athletes being overpaid or underpaid across time? What does this reveal about athletes around the world today? Answer: One can just look at the percentage of revenue paid to players. Taking this approach, it appears that athletes were underpaid before the introduction of free agency. It also indicates that athletes in Europe, where labor restrictions are less common, are paid much better than North American athletes. 13. Explain how Anthony Krautmann measured the MRP of a professional baseball player. What did he assume about the market for baseball free agents? Answer: Krautmann regressed free-agent salaries on the free agent’s statistics. This gave him a measure of how the market valued these actions. He then used this model to forecast the salaries of nonfree agents. Krautmann assumed that the free-agent labor market was efficient. 14. Krautmann’s approach was applied to baseball, football, and basketball in Krautmann, von Allmen, and Berri (2009). Were athletes in these sports found to be overpaid or underpaid? Answer: In each of these sports, players without the ability to sell their services in a free-agent market were found to be underpaid relative to free agents. 15. Karl Marx argued in the 19th century that capitalism exploits workers; J. B. Clark argued in the 19th century that workers are paid what they are worth in a capitalist system. How does the study of sports allow us to address the arguments of Marx and Clark? Answer: The study of sports suggests that Marx is right that workers are exploited when they lack bargaining power. When workers have bargaining power in sports, though, the results are more consistent with Clark’s argument. So the study of sports allows us to see when Marx and Clark are more likely to be correct. 16. Imagine you are hired by an NHL team. How much money would you suggest your team invest in a goalie? Answer: The textbook argues that goalies are not very different from each other. So a team should not invest much money in this position, since goalies appear to be relatively the same. 17. Imagine you are hired by an NHL team. How would you measure the marginal product of a skater center or forward? Answer: Hockey is a complex invasion sport, so one needs to first estimate the link between outcomes (team standing points) and goals scored and goals against. Then one needs to link goals scored to shot attempts and shooting efficiency. After this, one needs to determine how a skater impacts shot attempts and shooting efficiency. Another model is also needed to determine the impact that centers and forwards might have on team defense. 18. In 2016–17, Andrew Wiggins attempted 1,570 field goals for the Minnesota Timberwolves, a mark that led the team. His effective field goal percentage, though, was only 48.4%. This mark was below the league average and the average for the Timberwolves. So if Wiggins were removed from this team, what would likely happen to this team’s offense? Answer: We learned in the chapter that a player’s shots are mostly taken from teammates, so shot attempts would not likely change if Wiggins were lost. If he were replaced by an average shooter, though, team efficiency would improve. Team offense would likely get better. If Andrew Wiggins were removed from the team, the Timberwolves' offense would likely improve in efficiency. His high volume of attempts with a below-average effective field goal percentage suggests that redistributing his shots to more efficient players could raise the team's overall scoring efficiency. However, the team might need to compensate for the lost shot volume. Chapter Seven Study Questions Discrimination in Sports 1. Who was the first African American professional baseball player, and when did he play? Answer: It is generally believed that Jackie Robinson was the first in 1947. But Bud Fowler was a professional baseball player from 1878 to 1895. 2. When did the NFL become an all-white league? Why (and when) did the NFL integrate? Answer: The NFL became an all-white league in 1933 (after being integrated before that). In 1946, the NFL integrated again as part of a deal to move the Cleveland Rams to Los Angeles. This was done as part of the deal to lease the L.A. Coliseum. 3. When was the NBA an all-white league? Who were the first African American players in the NBA? Answer: The NBA was all-white when it was founded in 1946. In 1950, the league integrated. 4. According to Gary Becker, why should we expect market competition to eliminate discrimination? Answer: In a competitive environment, firms that hire from a larger pool of talent will have an advantage. So firms that discriminate will suffer and eventually go out of business. 5. Why is it difficult to study discrimination outside the sports industry? Answer: Discrimination occurs when two workers who are equal in productivity are treated differently. To know if this happens, you have to measure productivity. Outside of sports this is difficult. 6. What measurement error in the study of salary discrimination in the NBA did Jeffery Jenkins (1996) uncover? When this error was corrected, what impact did it have on the study’s results? Answer: Jenkins noted that researchers historically looked at current salary levels, current productivity, and race, and these studies found evidence of racial discrimination. Jenkins noted, though, that current salaries in sports are often determined many years in the past. Jenkins thought a better approach was to look at free agents and examine the link between their salaries, current productivity, and race. This study indicated that race did not impact free-agent salaries. 7. How should a researcher measure performance in a study of discrimination? Answer: Performance should be measured as the decision maker perceives performance. Therefore, a measure that is accurate (i.e., captures how a player actually impacts wins) but is not consistent with perceptions would not be ideal. 8. How has race been measured in the sports economics literature? What is an RGB score? Answer: Race is typically measured with a dummy variable. RGB score measures skin tone, which allows a researcher to employ a continuous measure of race. 9. What does it mean for a result to be robust? Answer: Robustness means that the results do not change when one makes small changes to the model. There tend to be different approaches to constructing a model that can be considered equally valid. If the results change dramatically as we consider different approaches, we tend not to think we have found anything. 10. What is implicit bias, and what was reported with respect to NBA referees? Answer: Implicit bias is a “positive or negative mental attitude towards a person, thing, or group that a person holds at an unconscious level.” The study of NBA referees found evidence for this with respect to the calling of fouls. However, after this research was publicized, the evidence of implicit bias disappeared. 11. When was basketball invented? How long after its invention was basketball made an Olympic sport? Answer: Basketball was invented by James Naismith in 1891–92. It was made into an Olympic sport in 1936, or less than 50 years after it was invented. 12. How are non‒U.S.-born players treated in both the NBA and Spanish Liga ACB? What are the potential sources of bias? Answer: Non‒U.S.-born players receive fewer minutes than U.S.-born players in both leagues. It could be that U.S.-born players are perceived to be simply better players, although the study controlled for player productivity. 13. What is the link between facial symmetry and the pay of NFL quarterbacks? Answer: Research indicates that the more symmetrical a quarterback’s face is, the more the quarterback will be paid, after controlling for productivity. 14. According to a collection of studies examining salary discrimination in the NBA, what factor dominates player evaluation in the NBA? Answer: Player evaluation in the NBA is driven by scoring totals. 15. According to this textbook, how did Derrick Rose win the NBA’s Most Valuable Player (MVP) Award in 2011? Answer: The study of the voting for the MVP Award indicated that voters primarily focus on player scoring and wins. In 2009‒10, Rose played for an average team in Chicago. Before the 2010‒11 season the Bulls added a number of players that helped the Bulls post the best record in 2010‒11. In addition, Rose took more shots and increased his scoring totals. Since Rose led the best team in scoring, he went from not being an All-Star player in 2009‒10 to being league MVP the next year. 16. Imagine a study examining whether or not Major League Baseball teams discriminated against shorter pitchers. If the study failed to find statistical evidence for discrimination, does this prove there is no discrimination? Answer: The answer to this question requires a student to understand the idea that “the absence of evidence is not evidence of absence.” Discrimination studies are fraught with difficulties, so we should not draw strong conclusions from a single study. No, the failure to find statistical evidence for discrimination in the study does not prove that discrimination does not exist. It only indicates that the study did not detect it, which could be due to limitations in the data, methodology, or sample size. Discrimination might still be present but not captured by the study's design. Therefore, the absence of evidence is not evidence of absence. 17. The study of sports media bias used a single equation to investigate how race impacted the voting for the NBA’s Most Valuable Player (MVP) Award. How would this study be different if the Oaxaca‒Blinder decomposition had been employed instead? Answer: Building off what is in the text, the Oaxaca‒Blinder decomposition would involve estimating an MVP voting model for the discriminated group: in this case, players who are black. It would then employ the characteristics of the group that is not discriminated against (i.e., white players) to predict the votes of the discriminated group. Finally, it would compare these hypothetical votes to the actual votes of the group that is not discriminated against. 18. Discrimination takes many forms and can occur across many dimensions. With respect to sports, construct a list of a. all the player evaluations where discrimination might be found (i.e., wages, allocation of minutes, etc.). b. all the dimensions of discrimination one might see (i.e., race, gender, etc.). Answer: The textbook introduces the subject of discrimination. This exercise leads the students to think of all the different forms of discrimination that can occur and all the decisions this might impact. a. Player Evaluations Where Discrimination Might Be Found: 1. Wages and Salaries - Differences in pay based on non-performance factors. 2. Allocation of Minutes - Unequal playing time given to players. 3. Team Selection - Biases in drafting or signing players. 4. Position Assignment - Stereotypes influencing which positions players are assigned to. 5. Contract Negotiations - Disparities in contract terms and conditions. 6. Performance Reviews - Biased assessments in player evaluations or feedback. 7. Promotion and Endorsements - Unequal opportunities for leadership roles or sponsorship deals. 8. Injury Management - Differences in the attention and resources provided for recovery. 9. Career Longevity - Disparities in opportunities for long-term career development. 10. Access to Training and Resources - Unequal access to facilities, coaching, or development programs. b. Dimensions of Discrimination: 1. Race - Discrimination based on a player's racial or ethnic background. 2. Gender - Biases in opportunities, pay, or treatment based on gender. 3. Age - Preferences or biases based on a player's age, often favoring younger players. 4. Nationality - Discrimination based on a player’s country of origin. 5. Physical Attributes - Biases related to height, weight, or other physical characteristics. 6. Sexual Orientation - Discrimination based on a player’s sexual identity or orientation. 7. Disability - Biases against players with disabilities or injuries. 8. Religion - Discrimination based on a player’s religious beliefs or practices. 9. Socioeconomic Background - Biases influenced by a player's economic or social background. 10. Educational Background - Discrimination based on a player's level of education or the institution attended. Chapter Eight Study Questions Women in Sports 1. What is Title IX and when was it enacted? Answer: Title IX is part of the Civil Rights Act of 1964. It originally focused on discrimination with respect to race, color, religion, and national origin. But in 1972, a clause was added stating that no one should be excluded on the basis of sex from the participation in, denied the benefits of, or subjected to discrimination under any educational program or activity receiving financial assistance. 2. How has the number of girls/women playing high school sports & college sports changed from before the passage of Title IX to today? What role have market forces and non-market forced played in the changes in participation rates? Answer: In 1981, 294,015 girls played high school sports. In 1973, this number increased to 817,073. Today it is over 2 million. There’s a similar pattern at the college level. In 1981, there were only 31,852 women playing college sports. By 1977, that number had increased more than 100% to over 64,000. The key issue is that participation rates changed dramatically after 1972. This clearly was not the result of market forces. When Title IX was passed, institutions were forced to provide opportunities to girls and women, and they took advantage of these opportunities. 3. How popular was women’s soccer in England prior to 1921? How and why did this change in 1921? Answer: There is evidence that women's soccer was as popular as men’s soccer. But FIFA, an organization run by men, ended this by banning women’s soccer. Again, non-market forces changed participation rates in sports. 4. How is FIP ERA calculated? Why do we believe this is a better measure of a pitcher’s performance? Answer: FIP ERA involves a regression of a pitcher’s Earned Run Average on the FIP factors (strikeouts, walks, home runs, and hit-by-pitch) and hits per balls put in play. The coefficients from this regression are used to predict a pitcher’s ERA by using the pitcher’s FIP factors and the league average for hits per balls put in play. Essentially FIP ERA captures what a pitcher’s ERA would be if the pitcher’s fielders were as good as the league average. This is done to remove the impact of the pitcher’s defensive players from the evaluation of the pitcher. 5. How does demand for the WNBA today compare to demand for the NBA today? How does demand for the WNBA today compare to what we saw in the NBA after 20 years? Answer: The NBA is much more popular today. But if we compare the WNBA to the NBA after 20 years, the attendance figures are comparable. 6. According to Cooky, Messner, and Musto (2015), how does coverage of women’s sports compare to that of men’s sports? How has this changed over time? Answer: Women tend to get less than 5% of the coverage from television, and that has actually declined over time. 7. How was the gender wage gap in professional tennis overcome? Answer: Billy Jean King threatened to boycott tournaments. In essence, a strike was threatened. 8. How does the percentage of revenue paid to WNBA players compare to what we see for the NBA? What explains the difference in the two leagues? Answer: The WNBA received about 33% of league revenue. The NBA receives about 50%. 9. In general, what percentage of leadership positions goes to men in the economy? Answer: About 20% of leadership positions goes to men in the economy. 10. What role does the gender of a coach play in outcomes for college softball, women’s college basketball, and the WNBA? Does the evidence support the idea that men are better leaders? Answer: Gender doesn’t appear to matter. This suggests that men are not better leaders than women. 11. Who is a better in the “clutch,” men or women? Reference the study of Grand Slam tennis in answering to this question. Answer: The study of tennis cited in the text suggests that women are better in the clutch. The authors hypothesized that higher cortisol levels in men reduce their ability to think critically when pressure mounts. 12. We noted in the text that attendance is relatively low early in a league’s time span. Design a model to predict attendance in a league. List and explain all independent variables that you believe might explain attendance. Answer: This exercise does not have one clear right answer. Two researched charged with designing a demand function will focus on different factors. But one would expect any model to include age of the league, population, income, and other entertainment options. To predict attendance in a league, key independent variables could include team performance (winning percentage, star players), market size (city population, economic conditions), ticket prices, promotions and marketing, and stadium characteristics (capacity, location). Additionally, league age (years since inception) and game day factors (day of the week, weather) can influence attendance. These variables collectively capture the main factors that drive fan turnout. 13. Demand for college women’s sports and international competitions involving women’s teams seems much higher than what we see for professional women’s sports leagues. What might explain this difference? Answer: There is no clear study of this. But one might suspect that in college and international competitions fans know who to root for. Even if they don’t know the players, U.S. fans know to root for the United States. It is not as clear, though, whom fans should root for when the Phoenix Mercury play the Chicago Sky in the WNBA. The difference in demand between college/international women’s sports and professional women’s sports leagues can be explained by several factors: 1. Institutional Support: College and international competitions often receive strong backing from educational institutions, national sports organizations, and governments, which helps in promoting these events and attracting audiences. 2. Community and School Spirit: College sports benefit from strong ties to local communities and alumni networks, creating a built-in fan base driven by school pride. International competitions evoke national pride, leading to higher viewership. 3. Media Coverage: College and international women’s sports often receive more media coverage during major events like the NCAA tournaments or the Olympics, generating greater visibility and interest compared to professional women’s leagues. 4. Event Significance: College and international competitions often represent pinnacle events (e.g., championships, World Cups), leading to heightened interest. In contrast, professional leagues have a longer season, with games potentially seen as less critical. 5. Accessibility: College sports are often more accessible, with games held at local campuses or widely broadcast, while professional leagues may have more limited exposure or higher ticket prices, which can reduce attendance and viewership. Chapter Nine Study Questions The Economics of College Sports 1. What public employee occupation tends to be the highest paid in each state? Answer: College coaches tend to be the highest paid in each state. 2. When did college athletics become commercial? How many fans were attending football games at Princeton and Yale in the 1880s? Answer: College athletics became commercial in the 1850s. There were 40,000 fans attending football games at Princeton and Yale in the 1880s. 3. Which U.S. president called for the formation of the NCAA, and what was its original purpose? Answer: Teddy Roosevelt created the NCAA as a safety organization. 4. What is the competitive balance argument for why student-athletes should not be paid? Answer: If students were paid, the richest schools would hire all the best athletes. 5. How does the ceiling on the pay to student-athletes impact competitive balance in college sports? Answer: College sports don’t have much balance because the top programs in each sport tend to attract most of the top talent. These players choose the top program so they can win. 6. How does competitive balance in women’s college basketball compare to that of men’s college basketball? What explains this difference? Answer: Women’s basketball has less competitive balance. A variety of explanations were offered in the text, including the level of pay in women’s professional sports, the history of women’s sports, and the level of media coverage. 7. According to our definition of exploitation and the calculation of MRP offered in the text, how many men on the 2014–15 Duke men’s basketball team were “exploited”? How many women on the Duke women’s basketball team were exploited? Answer: Exploitation is present when salaries are less than a worker’s MRP. For the Duke men players, the data in the chapter say that all the players were exploited. For the women, seven of the players generated more revenue than the cost of attending Duke. So seven were exploited. 8. How do the revenues of the top 32 college football teams compare to the revenues of NFL teams? How do the salaries of the head coaches compare? Answer: Revenues for college teams are substantially less. Pay is quite comparable. 9. According to von Allmen (2013), who is the “better” coach, on average, in college softball: a man or a woman? How did he reach this conclusion? Answer: They appear to be equal. His study looked at team performance in softball. 10. What is the “three-prong” test to establish compliance with Title IX? Which of these “prongs” is focused on the most? Answer: The “three-prong” test includes the following: •Proportionality Test: “Provides a composition of athletic opportunities to men and women that is proportional to the gender composition of the student body.” •Program Expansion Test: “Demonstrate consistent program expansion for women.” •Accommodation of Interest Tests: “Show accommodation of student interests or abilities.” •The proportionality test is focused on the most. 11. According to Anderson and Cheslock (2004), what do schools primarily focus on to achieve compliance? Answer: Schools primarily focus on the proportionality gap to achieve compliance. According to Anderson and Cheslock (2004), schools primarily focus on roster management to achieve compliance with Title IX requirements. This involves adjusting the number of athletic opportunities available to men and women to ensure gender equity, often by adding women's sports teams or limiting the size of men's teams. The goal is to align with the proportionality standard, which requires that the gender distribution of athletes closely matches the gender distribution of the overall student body. 12. According to Averett and Estelle (2013), what percentage of schools is in compliance with Title IX? Why are more schools not in compliance? Answer: Less than 15%. The issue these authors raise is lack of enforcement. Technically a school should lose federal funding if it is not in compliance. This has never happened, though. 13. Are college sports profitable? Reference data and theory in answering this question. Answer: The data suggest that many college programs do not generate profit. But the theory of how non-profits work explains these data. Non-profits have an incentive to spend all revenue. Hence, profits tend to disappear for non-profits. 14. What is Bowen’s revenue theory of cost? What is the revenue-cost spiral? Answer: Bowen argued that non-profits have an incentive to spend all revenues. So all revenues essentially become costs. That means that as revenues rise, costs will also rise (i.e., the revenue-cost spiral). 15. What has happened to the population of men coaching college women since 1972? What has happened to the population of women coaching college men in the same time period? How would you explain the difference in the observed pattern? Answer: Initially mostly women coached women’s sports. As time went by, more and more men started coaching women. Today, less than 50% of coaches in women's sports are women. As for men's sports, it remains very rare to have a women coach men. This likely reflects the fact that pay has risen for the coaches of women’s teams, and athletic directors, who are mostly men, are making the hiring decisions. 16. If schools decided to pay student-athletes in terms of their economic value, where would this money come from? Who would likely see their pay reduced if this were the case? Answer: The money already exists in the programs. To pay the players, the schools would spend less money on facilities. In addition, coaches’ salaries would be reduced. 17. In some sports, the revenue generated by the athletes will not be enough to cover the cost of the scholarships. Should schools still extend these scholarships in a world where there are no restrictions on the pay of athletes? Answer: Schools give scholarships to students for a variety of reasons (e.g., academics, music, etc.). Schools do not require that each student generate revenue to justify these scholarships. So, just as schools sometimes think a music scholarship makes sense, they can also think a scholarship to a non-revenue sport also makes sense. In a world where there are no restrictions on athlete pay, schools should still consider extending scholarships if they value the educational and developmental opportunities provided. Scholarships can attract and support talented athletes who contribute to the overall student experience, enhance team performance, and foster school spirit. Additionally, scholarships can provide financial assistance to athletes who might otherwise be unable to afford college, ensuring that athletic participation remains accessible and equitable, regardless of the revenue generated. Chapter Ten Study Questions Subsidizing Sports 1. According to Gregory Mankiw, what percentage of economists agree with the following statements? a. “Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy.” Answer: 90% b. “Local and state governments should eliminate subsidies to professional sports franchises.” Answer: 85% 2. Which economist advocated expansionary fiscal policy as the solution to the Great Depression in the 1930s? Since the end of World War II, presidents of which political party in the United States have agreed with this approach to resolving recessions? Answer: John Maynard Keynes; both parties have adopted a Keynesian approach in response to recessions. 3. What is a multiplier? With respect to government spending, what is crowding out? Answer: A multiplier is the number by which the change in investment must be multiplied to calculate the resulting change in income. Crowding out occurs when the government attempts to increase spending in an economy at full employment. The increased spending simply takes inputs that could be employed in the private sector. 4. What do ex ante studies find with respect to public spending on sports? Answer: Ex ante studies occur before the event takes place and are generally offered by consultants. These studies typically find large positive benefits from spending on sports. 5. According to Robert Baade and Victor Matheson, what are the problems with ex ante approaches to the study of public spending on sports? Answer: These authors found three basic problems. Consultants fail to take into account the substitution effect (or the idea that consumer spending on sports reduces other spending by consumers), the crowding out effect (in this context, sporting events reduce the willingness of other people to come to the area of the sporting event), and the leakage effect (or the idea that sports often employ people who take their income and spend it in other markets). 6. What do ex post studies find with respect to public spending on sports? Answer: Ex post studies find that sporting events do not generate many economic benefits. 7. Which stadium may be seen as marking the beginning of the move toward public funding of sports arenas and stadiums? Answer: County Stadium in Milwaukee in 1953. Three stadiums, though, came first: the Los Angeles Coliseum (1923), Soldier Field in Chicago (1923), and Cleveland Municipal Stadium (1931). 8. On average, how much does the public spend on building stadiums in the MLB, NFL, NBA, NHL, and MLS? Answer: About 50%. 9. With respect to the World Cup and Olympics, what is the economic impact of these events from ex ante and ex post studies? Answer: Ex ante studies show a substantial economic benefit. Ex post studies, though, suggest that these events do not provide many economic benefits. 10. List and explain the short- and long-run costs incurred from hosting the World Cup or Olympics. Answer: There are the costs of bidding for the games, conducting opening and closing ceremonies, providing securities, building and maintaining facilities, and providing lodging to athletes and event organizers. The cost of maintaining facilities after the event can be substantial for years. 11. According to Juvenal, why did Roman emperors provide sporting events to the public? Answer: To prevent the masses from rioting. 12. According to Kavetsos and Szymanski (2010), why might governments subsidize sporting events? According to these authors, is it better to host an event or be the nation that wins an event? Answer: Sports do not generate economic benefits, but they make us happy. The authors argue that hosting the event creates more happiness than winning the event. 13. Imagine developers wish to build a racing track. Two locations are considered. First is Los Angeles, California, a market with a host of entertainment options. The second is Visalia, California, a market with far fewer entertainment options. How would the economic impact of the racing track differ between these two markets? Answer: The key issue here is that the crowding out we typically see would be more common in Los Angeles. In Visalia, crowding out would be less likely. Tourists aren’t going to Visalia, so the racing track would just attract tourists who were not coming without the track. 14. Imagine you were living in a city with high unemployment and a sports team proposed that the government subsidize a new stadium for the team in the city. Discuss why this proposal might be good for the local economy and why it might not be. Answer: On the one hand, a stadium would put to work unemployed resources. On the other hand, so would other projects the city could consider (roads, schools, etc.). So even in an economy with high unemployment, spending on stadiums might still not be a good idea. Chapter Eleven Study Questions Moneyball On and Off the Field 1. Why have Milton Friedman and L. J. Savage argued that human beings do not need to be “lightning calculators” to make rational decisions? Answer: Friedman and Savage argued that people do not need to know advanced math to make economic decisions. The process of trial and error would lead people to the right decision. 2. What is the link between Batting Average, Isolated Power, and Eye (define these terms) and a. runs scored per game? Answer: Each of these factors impacts runs scored per game, with Batting Average having the largest impact end Eye having the smallest effect. b. salary? Answer: Each of these factors impacts salaries, with Batting Average having the largest impact end Eye having the smallest effect. c. What does this tell us about the Moneyball story? Answer: The Moneyball story says that the success of the Oakland A’s changed the valuation of a player’s ability to draw a walk. But the study noted in the text indicated that baseball probably always valued player performance correctly. 3. Do we find Moneyball in the market for pitchers? Answer: According to the work of J. C. Bradbury, pitchers should be valued in terms of independent factors like strikeouts, home runs, and walks. His study of salaries in baseball indicates that this is true. 4. Is the evidence from baseball consistent with Veblen’s critique or the view of Friedman and Savage? Answer: Friedman and Savage. 5. What factor(s) primarily determine wins in the NBA? What factor(s) primarily determine a free agent’s salary in the NBA? Answer: Wins in the NBA are primarily about shooting efficiency, rebounds, and turnovers. Salaries, though, are primarily determined by total points scored, which players can manipulate by simply taking more shots. 6. Is the evidence from the free-agent basketball market consistent with Veblen’s critique or the view of Friedman and Savage? Answer: Veblen. 7. What did Burgher and Walters (2003) report with respect to the drafting and performance of a. college versus high school players? Answer: Performance says that college players should be preferred. But the drafting process prefers high school players. b. positional players versus pitchers? Answer: Performance says that positional players should be preferred. But the drafting process favors pitches. 8. In the NBA, what factors primarily dictate why a player is drafted? Answer: Players are primarily drafted for scoring in college, playing for a winner, and being young. That means that teams are undervaluing older players who do not score and do not play for winners. 9. What does the NBA learn from the combine? What does an NBA team learn from a player’s Final Four appearances? What does the NBA believe it learns from the combine and the NCAA tournament? Answer: Neither the combine nor the appearing in the Final Four are related to future productivity in the NBA. So the NBA actually learns nothing about a player from the combine or the Final Four. However, the study of where a player is taken suggests that decision-makers in the NBA believe they learn quite a bit from the combine and the Final Four. Both appear to impact where a player is selected. 10. According to Massey and Thaler (2013), what is the best draft pick to have in the NFL draft? Answer: According to Massey and Thaler (2013), the first picks in the second round have the highest surplus value. The picks in the first round tend to be more expensive and the returns tend to not be much higher than players taken in the next round. 11. According to Berri and Simmons (2011a), how well do NFL teams do with respect to the drafting of quarterbacks? Answer: Evidence was offered that draft position and future performance were not really correlated because teams focus on a number of factors like Wonderlic scores and combine factors, and these factors do not predict future performance. 12. Your favorite NFL team is facing fourth down and 3 yards to go at midfield. According to David Romer’s research, should the team go for it? Do NFL teams tend to listen to this research? Answer: According to Romer’s research (and Figure 11.2), the team should go for it. The expected benefits of going for it exceed the benefits of punting. NFL teams, though, do not listen to this advice. 13. Rickey Henderson set the record for stolen bases and walks (the latter record was eventually broken). Which record—in terms of wins in baseball—is the most impressive? Briefly explain your answer. Answer: Trying to steal bases leads to outs, which is a bigger cost than gaining a base. To break even, a team needs to be successful at least 70% of the time. Consequently, stealing bases doesn’t lead to much of a benefit, and that benefit is smaller than the benefit gained by drawing a walk. 14. What is the impact of coaching in soccer, the NBA, and MLB? Does the research show that teams can do without coaches? Answer: In each of these sports, coaching was not found to dramatically change outcomes. But that does not mean coaching isn’t necessary. The studies do not look at teams with and without coaches, so they cannot tell us if coaches are needed or not. 15. Is the sports labor market efficient? Answer: As with much of economics, the answer “depends.” In sports where the data are relatively easy to understand (like baseball), it appears the decision makers behave as Friedman and Savage propose. As the data become more difficult, as in basketball and football, decision makers behave more like Veblen believed. 16. Given what you learned about the NBA draft, what do you suspect is the actual value of a lottery pick (i.e., a pick at the top of the first round)? Answer: Teams overvalue scoring, playing for a winner, and being young, so players like this are taken earlier and are often not better than those taken later. But players taken first cost more, so picks later in the draft may be more valuable than those earlier in the draft. 17. At the conclusion of the 2016–17 season, the San Antonio Spurs had yet to have a season in the 21st century when the team did not win at least 50 games and 60% of its contests (see http://www.basketball-reference.com/teams/SAS/). How many lottery picks have the Spurs employed in the 21st century? Why do you think the Spurs have achieved so much success with so few lottery picks? Answer: Lottery picks tend to be players who focus on scoring points. Winning, though, is about efficient shooting, rebounds, and turnovers. The Spurs appear to have created consistent winners by ignoring players who focus on scoring and instead focusing on players who win. And, of course, it helps to have Gregg Popovich as the coach. Solution Manual for Sports Economics David Berri 9781319106157
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