Market Power

Albert Pujols to the DL

Albert Pujols has been diagnosed with a small fracture in his left wrist and will miss 4-6 weeks.

That's from RotoWorld.  This episode will give the baseball world a chance to gauge the marginal product of Pujols.  Will the Cards fall apart without arguably the best position player in the game today?  Will they tread water?  Will they get better?  

Assistant Coach Salaries in College Football On the Rise

Fom the St. Louis Post Dispatch:

The spike in salaries for assistant coaches comes at a time when money in college athletics is getting more attention, from rising television contracts to talk of paying athletes a stipend above the value of their scholarships.

The SEC paid its assistant coaches an average of $276,122 in 2010, according to figures compiled by St. Louis attorney and agent Bob Lattinville of the firm Stinson Morrison Hecker.

The Big 12 was second at $232,685 and the Big Ten a distant fourth, behind the Atlantic Coast Conference, at $187,055. In each instance, the averages do not include salaries at private schools such as Baylor, Penn State and Vanderbilt.

"We've gone over a million (for an assistant) and I think that will be a trend,'' said Lattinville, who provides research for various USA Today salary studies. "Everyone recognizes the marquee value of pulling in an SEC assistant. Week in and week out they're facing the best opponents. That's why they'll pay more to keep them."

Some will undoubtedly think that this is a bad thing.  The economy remains weak and colleges and  university budgets have followed the economic trend. Besides, the business of higher education is teaching and research, not sports.  Why spend more on athletics when academic budgets have been weak?  

Whether colleges should reduce their emphasis on athletics is an important question, especially in these days of the higher education bubble.  But regardless of what higher education should be about, the reality is that schools have chosen the athletic route and if they want to remain competitive on the field, they have to be competitive in the market for coaching talent.  

 

Big XII Revenues to be Distributed More Equally

From the KC Star:

The income from all of its TV contracts plus other sources of revenue such as bowl games and the NCAA basketball tournament will result in about 76 percent distributed equally.

Previously, about 57 percent was shared equally and the rest went to schools based on television appearances. The more a team was on TV, the more money it received.

This won't necessarily improve competitive balance, but it should improve the political climate within the conference.  Nebraska didn't leave because didn't leave the conference because of economic inequalities.  NU left because it didn't like the Texas-centricity of the Big XII.

 

"Professors Urge U.S. Antitrust Review of Football Bowl System"

From InsideHigerEd.com:

A group of economics and law professors has urged the Justice Department to investigate whether the Bowl Championship Series violates federal antitrust law, The Wall Street Journal reported. The letter to the department's antitrust division, which was signed by 21 professors and lawyers, asks the agency to find college football's current mechanism for determining a national champion to be a cartel that favors BCS members over other college teams.

The NCAA has already been shown to be bound by US antitrust law when it comes to the negotiation of media rights (the NCAA v. the Board of Regents of the University of Oklahoma).  But this is a different animal:  the determination of a champion.  A league needs to determine rules that define the champion and this must be done collectively.  Moreover, defining thiese rules is not in and of itself a restriction of competition.  I am not a lawyer, but it seems the single entity defense may apply.

But if the league - in this case the NCAA - is restricting access to the championship, then my untrained legal mind suggests that the single entity defense is not a sufficient defense in this case.  Yes, collective action is needed to set championship rules, but those rules should apply to all league members, not just the most popular one.

Baseball Attendance Projections

Rob Neyer notes that the Sports Business Journal is projecting an increase in attendance at baseball games of between 3-7 percent.  Rob says:

Coming after three straight seasons with small declines in MLB attendance, an increase of three or more percent would represent a huge improvement. But this really shouldn't come as a huge surprise. For all the naysayers and the polls and the ridiculous notion that baseball is somehow dying, the sport is incredibly popular in America. They only way to really hurt the game is to lose a season (or part of a season) to a strike or lockout. And I don't think anyone is that stupid.

The increase should be expected if we assume the economy has sufficiently rebounded.  But if baseball teams systematically overcharge for tickets for whatever reason - a fluky possibility - that would hurt the chances of seeing attendance grow.  I doubt that happens because my sense is that the folks who set ticket prices have a pretty good handle on demand conditions in their local markets.

Carlos Silva and Sunk Costs

The Cubs have rid themselves of Carlos Silva.

“Basically, he wasn't good enough to make the team,” Cubs general manager Jim Hendry told the Chicago Tribune. “We try to factor in not only spring training, but the second half of last year. You're looking at a guy who had a 14-something ERA from July 11 on, and came to camp with the notion that he already had a spot in the rotation . . . Obviously, we're dealing with a man who at this particular point of his career is not willing to face the facts that what he's done the last few years, except for a two-month period (last year), is well below major league standards.

“And he seemed to make a continual problem of blaming everyone but himself. Twenty-nine hits in his first 11 innings of camp, and I've never had anyone I've dealt with classify that as 'bad luck.'”

Silva isn't happy about it, saying that Cubs pitching coach wasn't straight with him when saying there was open competition for the 5th starter's spot.

Whatever.  Silva came to the Cubs in a trade for the cancerous Milton Bradley.  You might remember that episode.  Bradley was brought in to bring a little more power to the Cubs line-up, but instead it seemed what he injected was a nasty bit of chemistry.  The Cubs finally shipped him off to the Mariners in exchange for the Mariner's bit of bad chemistry, Mister Silva.  Silva started off like a bang with the Cubs last year, but fell off the cliff rather quickly.  He didn't show decent stuff in camp this year and he also got into a clubhouse altercation with Cubs third baseman Aramis Ramirez.

What's the economics angle here, you're asking?  Silva will be paid $11.5 million this year, but the Cubs have decided to eat his contract.  This is an excellent example of a team behaving rationally in the face of sunk costs.  

Sunk costs are costs that cannot be avoided no matter what you do.  Silva was going to be paid this salary whether or not he made the team.  So, the argument goes, the Cubs should ignore that salary when making a decision whether to add him to the final roster.  Instead, they should pay attention to his productivity and the productivity of the other players in camp.  

Adding him to the roster solely because of the amount he's being paid is like skipping surgery for a potentially life-threatening cancer because you've spent a lot of money arranging a European vacation that you'll have to miss because of the surgery.  You can't get that money back but you can save your life.  The Cubs did their little bit of cancer surgery by getting rid of Silva.

Say what you want about the Cubs' decision-making abilities in the front office.  They got this one right.

Mike Anderson to Arkansas: The Winner's Curse?

Sam Mellinger thinks that Arkansas might be saddled with the Winner's Curse in the hiring of former Mizzou coach Mike Anderson.  He makes several strong points for his case.

Anderson spent five mostly eh seasons in charge of what could be one of the best 20 programs in the country, doing just enough to convince people that better days are always coming. On a scale of one to 10, Anderson performed like a 6 and figured out a way to be paid like a 9.

...After a disappointing season in which he went 8-8 and tied for fifth in a mediocre Big 12, Anderson is now being paid the same as Mike Krzyzewski.

...The $2.2 million salary that Anderson and agent Jimmy Sexton were able to get from Arkansas is sports’ biggest overachievement since Andy Roddick married Brooklyn Decker.

The Razorbacks are paying for a shiny Lexus and getting a perfectly adequate Honda.

...When a fifth-place-in-the-Big-12 coach like Anderson leaves for another job, the fan base should look forward to an upgrade.

I can see why Arkansas wanted Anderson back as their coach:  he's a link to their glory days of the mid 90's.  But he's being paid more on his potential than on his actual results.  He's a fine coach and helped pull Mizzou out of the Quin quagmire.  But he peaked two years ago with a surprise Elite Eight run.  It's been downhill since then.

It's quite possible that Mizzou's fortunes under Anderson would have been much different had he been able to get Keith Dewitt and Tony Mitchell on campus.  Both DeWitt and Mitchell would have been low post players at Mizzou, the type of player they were woefully short on this season.  A big reason Mizzou was 8-8 in conference play and one-and-done in the tournament was their lack of size down low.  DeWitt and Mitchell surely would have helped Mizzou's cause in underneath the basket.

Then again, you could argue that Anderson's recruitment of two risky players was a waste of resources, resources that could have been used on recruiting other less-risky players who would have been able to make the grade and enroll in school.  I'm looking at you, Alec Burks.

Anderson may be able to get some of those academically-challenged players at Arkansas and thereby realize his potential and earn his salary.  Maybe the Arkansas fans get some pure satisfaction out of having him as their coach.  If not, then Arkansas will have fallen victim to the winner's curse.

Early Review of the Brad Pitt Moneyball movie - Good Stuff!

The sports drama -- rewritten by Aaron Sorkin (who just won an Oscar for 'The Social Network) and directed by Bennett Miller -- digs into Billy Beane (Brad Pitt), the general manager of the cash-strapped Oakland A's. After the team loses many of its key players, Beane hires an economic genius (Jonah Hill) and they begin using advanced statistical analysis that gives them a hidden advantage over other, wealthier teams. Other supporting players include Phillip Seymour Hoffman and Robin Wright, so while Hill mixed with Pitt might make this seem comedic, it is, indeed, a drama -- one that's attracting some great buzz and gushing about love and triumph.

Two moviegoers who caught an early screening shared their glowing responses with Hollywood Elsewhere. The first loved it, going so far as to call it "a triumph of storytelling, editing and a little bit of star power." But the kicker is surprising casting twist Hill (who took over for Demetri Martin, another funnyman): "Hill is fantastic as a number-crunching nobody, and is really wonderful underplaying everything." The second secret reviewer agrees, noting that Hill was "killing every scene he's in."

This reviewer also noted that while most of our big sports movies use the game as a stepping stone to dramatic fare -- romantic, interpersonal, coming-of-age -- this is "a sports film seen through the prism of sports."

Link here via John Palmer.  This will make the second Michael Lewis book to be made into a movie, the other being The Blind Side.

Two sports economists, Jahn Hakes and Skip Sauer examined the Moneyball hypothesis using econometrics, and found evidence for it.  But as people figured out that skills were being incorrectly valued, the mis-pricing disappeared.

Michael Lewis's book, Moneyball, describes how an innovative manager working for the Oakland Athletics successfully exploited an inefficiency in baseball's labor market over a prolonged period of time. We evaluate Lewis's claims by applying standard econometric procedures to data on player productivity and compensation from 1999 to 2004. These methods support Lewis's argument that certain baseball skills were valued inefficiently in the early part of this period, and that this inefficiency was profitably exploited by managers with the ability to generate and interpret statistical knowledge. Consistent with Lewis's story and economic reasoning, as knowledge of the inefficiency became increasingly dispersed across baseball teams the market corrected the original mispricing. 

The Negative Externalities of Sporting Events

From the email inbox.

The University will host the NCAA Division II Central Regional Men’s Basketball Championship at 7:00pm this evening in Taylor Center’s Bresnan Arena.  Minnesota State will take on Fort Lewis College, with the winner advancing to the Elite Eight national championship tournament next week in  Springfield, MA.  Athletic department officials are expecting a large crowd this evening.   While a good number of those in attendance will be on-campus students, nearly 75% of the total will come from off-campus visitors, which may create a few challenges in terms of traffic congestion and pedestrian flow that could cause some delays.  We expect a high number of  University students arriving for night classes and basketball fans coming to the game for a 7:00pm tip-off to simultaneously converge on the area between 5:45-6:45pm. Please plan accordingly, allow some extra time, and proceed with caution in the parking lots, pedestrian crossings, and streets surrounding Taylor Center.

When contemplating the economic impact of such events, please account for external costs and benefits.  Thank you.

Today's Stadium Post

"This arena is not brick and mortar, ice and air-conditioning. This arena is a family," he said.

Craig Van Kessel, a disabled military veteran, agreed.

He said six months after getting a job with the team, when he had major surgery, his co-workers called, sent cards and offered help. The team also donates prizes each year for a Western Amputee Golf Association tournament that Kessel helps organize.

If the team leaves, he said, it affects "us little people."

Story here.  The one-sided nature of the article frustrates Warren Meyer, who writes:

Nowhere in any of its editorials or news articles acting as thinly veiled editorials does the AZ Republic reveal that it is an enormously interested party to the transaction.  The Sports Section sells papers, and the presence of an additional major league franchise adds a hard to measure but most definite contribution to the paper’s bottom line.

That explains why the article resorts solely to playing on people's emotion and presents no discussion of hard data to support its claims.  Fortunately, the Atlanta Journal Constitution presents an article in which sports economists discuss some hard data.

A new open-air stadium downtown for the Atlanta Falcons would be of enormous benefit — to the Atlanta Falcons. Neither local taxpayers nor the region’s economy is likely to accrue much advantage from a new arena built on public land, in part with public money, experts told The Atlanta Journal-Constitution last week.

“Economists have studied the economic impact of stadiums to death, and the clear consensus is that there is no positive impact,” said author and sports economist J.C. Bradbury of Kennesaw State University. “Economists don’t agree on a lot, but right wing, left wing, they all agree on that.”

Read the whole thing.