The Intangible Benefits of the Vikings and the Relocation Threat Credibility

Conor Dougherty of the Wall Street Journal recently wrote an article on what the Vikings are worth to Minnesotans.  He focuses on a recent paper written by Aju Fenn and John Crooker.  Their paper, recently published in the Southern Economic Journal, puts a point estimate of over $500 on the value that the average household puts on the Vikes.  But this is not any ordinary valuation estimate.  This is an estimate that people put on the Vikes when faced with a credible threat that they will leave if the Vikes' ownership doesn't get a new stadium (i.e  public subsidies).  Here is the abstract of the published paper:

This study offers the opportunity to examine the welfare contribution of the Minnesota Vikings to Minnesota households in the context of a credible threat of team relocation.  We find the credibility of the threat 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 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.  The range of welfare contributions by the Vikings to households in Minnesota is $445.3 million to $1,571.3 million according to a 95% confidence interval based on our study.

There are about 2 million households in the state of Minnesota, yielding a 95% confidence interval range of approximately $223 to $786 per household, or $89 to $314 per person in each Minnesota households (assuming 2.5 people per household). 

John Whitehead and King Banaian, who argues that the net-of-stadium-cost average benefit per household is closer to $300 rather than Fenn and Crooker's $500+, discuss some of the issues of using CVM methodology to measure intangible benefits.

But what about the threat?  How credible is this threat?  LA is a very inviting market.  It has no NFL team although it is the second largest media market in the nation.  Yes, the way that teams generate (largely collectively through the television contract) and share revenues makes the LA market less profitable than it otherwise would be, but it's still an inviting target.

More to the point, Minnesota is not the only team being talked about as a potential tenant of a new LA-area stadium.  Jacksonville, Buffalo, San Diego, Oakland, San Francisco, and St. Louis have all been mentioned as possible tenants of any LA stadium and, according to this AP report, Jacksonville and Buffalo are the first choices of Majestic Realty Company, the company behind the plan to build a new stadium in Industry, CA.

In economics, the more cities there are competing over a given franchise, the more negotiations move in favor of the franchise.  But as more franchises join in the fun, the negotiations tip back towards the cities and the franchises lose some leverage. 

This is not to mention the fact that many cities and states, especially California, are in a world of hurt when it comes to their public finances.  There's not a lot of money out there to build new stadiums for teams.

Comments

[arizona home insurance]

It might be interesting to get feedback on how Los Angeles feels it has affected them not having a football franchise there. It's still hard to believe that is the case too.