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April 23, 2004
Eric Gets A Lesson In Economics
Some days are better than others. And then there are days when you wish you had actually gone to grad school. I had one of those days earlier this week when JC at Sabernomics used his doctorate in Economics to dissect this statement that I made last week about Major League Baseball allowing the Montreal Expos to relocate to Washington, D.C.: Washington is simply more valuable to MLB without a team, as a bargaining chip to blackmail other cities into paying for publicly funded stadiums, than it is as a home for the wayward Montreal Expos. To which JC responded with a logical and detailed mathematical model to refute my assertion, and state: This leads me to believe that MLB is more likely to use available market for expansion rather than extortion. Now, before you start flaming me for all of these "assumptions" I will grant that the model is very basic. It is just a starting point for my thinking on this issue. I am happy to receive suggestions. I think the most troubling unstated assumption of my analysis is that cities with teams properly perceive the threat of a team leaving. If the probability of departure is perceived to be greater than the actual probability, then extortion may be preferable to expansion. But, if cities overestimate the probability of team relocation, then leaving a city open for extortion is not necessary. Owners can extract subsidies by threatening to move the team to unqualified markets AND obtain revenues from expanding into a qualified market. Ken Houghton, one of JC's readers, analyzed JC's model better than I ever could: Hmmm. Let's see: the Senators became the Rangers in (memory serving) 1972 because they perceived the DFW metro area (and its accompanying 95-in-the-shade-and-there's-no-shade summers) to be preferable to DC (with its 85-even-with-shade-and-130%-humidity summers). Whew! Thanks saving my bacon, Ken. Because all I really had to say in response to JC's argument was this: 33. No, I'm not talking Rolling Rock. Instead, I'm talking the nearly 33 years that have passed since the second incarnation of the Senators absconded to Texas. Since then, MLB has expanded five times (Seattle, Toronto, Denver, Miami, Tampa Bay), and in two of those instances, it expanded into markets that were arguably smaller or less attractive financially than Washington. What has MLB been doing over that interval besides using Washington as a vehicle for extortion? But that isn't the whole story. As many of my regular readers know, I've been following the saga of Washington Baseball for some time now, and have come to a variety of conclusions, which could be summed up this way: while the Washington area might look like the most attractive candidate for relocating the Montreal Expos, a combination of other factors are conspiring to make it a lot less attractive than it may seem on the surface. As a result, this creates an ideal situation to create exactly what JC describes in his post: a situation where the perceived possibility of relocation far exceeds the actual risk: Check out the following two posts for more details on my reasoning: In the meantime, I have to see if George Mason offers a Masters program in Econ for night students.
Eric
12:00 AM
Trackback PingsTrackBack URL for this entry: CommentsI would add a prime non-baseball example to this: Los Angeles and the NFL. A fairly blatant instance of using the 2nd-largest market in the land as a permanent (for now) bargaining chip for the other NFL owners to extract demands from their home bases. The league offices are forever saying that the stadium situation isn't good enough in LA for an expansion franchise, yet it's good enough for owners to threaten to relocate there whenever they want something from their current homes. Posted by: at April 23, 2004 06:42 PM Post a commentThanks for signing in, . (If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.) |