Explain using managerial economics
http://vcampbethel.blob.core.windows.net/public/Courses/MBA_506/Unit_8/econ_unit8complete.pdf
go to the link given to read (and skim) the following portions of the Porter-Thomas paper, “PUBLIC SUBSIDIES AND THE LOCATION AND PRICING OF SPORTS,” working paper, 2007.
READ: Abstract
READ: Introduction (pp. 1-2)
SKIM: Section II: Subsidy Bidding and the Invariance of Team Location (pp. 3-11)
READ: Section III: Team Owner Pricing Behavior with Public Subsidies (pp. 11- top 14)
SKIM: Section III.2 Team Owner Pricing Behavior with Public Subsidies (pp. 14-22).
READ: Concluding Remarks (pp. 23-25)
Answer the following questions:
1. Explain, using managerial economics, why sports economists believe ticket prices are too LOW. No more than 75 words, please. You can do an excellent job with 40 – 50 words if you are concise.
2. For any general profit-maximizing firm with market power (i.e., a price-setting firm, such as Microsoft, Toyota, or Starbucks), why do we NOT expect to see on an ongoing basis shortages of goods or services provided by these firms? Explain briefly (40 – 50 words would be about right).
3. Explain why Porter and Thomas think sport ticket prices that are so low as to cause persistent shortages are in fact rational, profit-maximizing pricing strategies. No more than 75 words please. You can do an excellent job with 40 – 50 words if you are concise.
