Web MasterPicture two people waiting in a hot dog line at a baseball stadium. One of them, a male dressed in his gear, wears a shirt with a name on the back that is not his. He leans his arm up against the sticky rail that tells him where to stand and comments to his wide-eyed girlfriend, “You know.baseball players, and sports players in general, are overpaid. I mean, did you hear about the Derek Jeter deal for 189 million over 10 years? It’s crazy.I mean these guys get to play BASEBALL all year long and make more than I do!”
She looks amazed. The somewhat obnoxious guy that she’s been dating for the past hour actually has made a thoughtful point. She thinks about it awhile and eventually comes to the conclusion that he is right. So she says, “Yeah.” Being an intelligent young lady, her mind drifts off to where she would rather be than a stadium.anywhere. The two of them get their food and return to their seats. The ironic part: they just paid $8.00 each for a hot dog and a small Coca-Cola. Even more ironic is the fact that the seats they are returning to cost $25 a piece, plus the $7.00 for parking.
Also, we must add in the opportunity cost-opportunities forgone by spending time at the stadium. It will be complained about.
There are some interesting economics that jump to mind with the above story. You may be wondering what the economics majors at Washington University do with our time. Well, we sit in Eliot Hall (the amazingly functional and efficient building that the school has not yet raised your tuition over by trying to make look like a castle) and think how this article reads.
First, let’s look at how prices at a baseball game work by taking into account the lines at the concession stands and the demand for tickets. We all know from supply and demand that as the price of the hot dog increases, people buy fewer hot dogs and switch their purchase to nachos, or perhaps some other food. Because the brilliant people behind stadium prices know that this will occur, they increase the price of nachos as well. Eventually all the prices are jacked up to the point where profits are maximized. Maximization will occur when there is always a line of one person. If food were free, the line would be quite long. If a hot dog cost $100, there wouldn’t be a line.
If the price increases to the amount where the line is always about one or two people, they can sell the same amount of hot dogs at much higher prices and still lose no sales. The same goes for seat tickets, only now the “game” is slightly different. This time, seats are finite, so theoretically, prices can be raised to the point where all seats are taken. Any price increase results in unsold tickets. The result? Only the rich will enjoy live baseball. In my personal opinion, since sports is a business, this will all eventually occur, as the stadium management will narrow it down to exactly what price maximizes the profits of the concession.
How do we get more for our dollar as consumers of baseball entertainment? By lowering our willingness to buy at the high prices. Only by doing so can we effectively reduce prices, which are absurd in the first place. If we go back to the hot dog example, consider what would happen if nobody bought hot dogs at, say, $6.00 a wiener. Well, if the current price were $6.00, we’d see it drop as the vendors realize that their revenue is equal to $6.00 per hot dog x 0 hot dogs sold = $0.
The same applies for tickets. If you think they’re overpriced, then you shouldn’t buy the right to watch the game live. If many people follow this line of thinking, there will be seats that go unsold and the price of them will drop, encouraging more people to go to the stadium.
The amazing part is that all we’d need for this change is everyone doing it for a couple of weeks. Huge drops in game attendance across the nation could result in great things from a consumer’s standpoint. It must be everyone participating, though, or at least to enough to result in times when there is no waiting line.
I believe that it is worth teaching the sports business a little lesson. Next time, pack food or eat before hand, but under no circumstance buy what they sell. Perhaps at some point there will be no line, and these prices will fall. When they become reasonable, go ahead and purchase a hot dog, but once they rise again, don’t buy. The result would be better prices, ones that reflect the quality of the product and not the fact that people can be taken for suckers. Once price fluctuates with quality, we have accomplished the goal as the consumer benefits with price change information.
In addition, I believe that changes like this would increase the enjoyable aspects of the game. Consider the fact that what the lowest-paid player earns is still more money than most medical doctors make a year. Consumers who no longer give insane amounts of money to the sports industry for food and tickets would surely have an impact on player salaries.
Would it be so bad to eliminate the possibility of a player saying to himself, “You know, what I earn is more than enough, so what’s the point of trying to get any better?” If we as consumers want a more exciting game, then we should stop paying so much to see a lesser one. Essentially, this consumer-forced drop in price will increase player incentive for excellence. It will also increase competition, something fans seem to watch baseball for in the first place.