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Sporting Market Structures: Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Describe the market structure in which a typical professional sports team in or outside the United States (e.g. New York Yankees, Kansas City Wizards, New Jersey Nets, Manchester United, etc.) operates. Which structure Do they cleanly fit into (Monopoly, Oligopoly, etc.)? If yes, describe which one and support the conclusion you reached? If you believe they do not fit neatly into a structure, describe why not?

After you have reached your conclusion, examine and explain how, if at all, your conclusion changes if the scope of the marketplace changes, i.e., the area of consideration is narrowed or widened. The area of consideration may be the product or service under review, or the geographic area in which the product or service is offered.

Lastly, gather some information about a market structure called 'monopsony' and state why or why not that structure is relevant to the topic.

Solution Preview

It is natural to think that if we consider just the city or metropolitan area most teams are monopolies in their respective games. For example, take the case of the first team that you have mentioned: the Yankees. A total of 30 teams are part of the Major League Baseball, and they represent 27 different cities. The only cities with two teams in MLB are New York, Chicago, and Los Angeles: the three biggest cities in the country. In case of the NFL, there are 32 teams representing 31 cities with New York once again providing two teams.

When we start considering the case of each team, besides the six MLB teams in the three cities mentioned above, teams do not face any competition in terms of support when it comes to local support: for the market of that city, they are the only company providing the service. This moves across to the economic aspects too: they control access to the stadium and other commercial rights associated with the brand name. This suggests that professional sports teams are monopolies in their cities.

But there is one difference between the textbook monopoly and professional sports ...

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