The Economics of Sports
6th Edition
ISBN: 9781138052161
Author: Michael A. Leeds, Peter von Allmen, Victor A. Matheson
Publisher: Routledge
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Chapter 3, Problem 5P
To determine
The required number of ads to purchase as a group.
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The NHL faces a market demand curve given by P = 25000 – 0.01Q and a new rival league, the World Hockey League (WHL), is threatening to enter the market. Assume that both leagues face only fixed costs and they each have Cournot conjectures. What will be the profit-maximizing level of output and average ticket price for the NHL before the WHL enters the market? Show your work. After the WHL enters the market, work through the first four rounds of strategic pricing and output moves. Show your work. What will be the profit-maximizing output for each league and the average ticket price when all adjustments have been made? Show your work.
Consider the following graph:
AR, MR, ATC, MC
w*
W*
MC = ATC
AR=D
W
A
MR
a. Indicate the price a profit maximizing firm faces for a win, PPR. Shade in the area that indicates the team's
profit.
b. Indicate the price a win maximizing firm faces for a win, Pw. Shade in the area that indicates the team's
profit.
What are some arguments as to why teams are not monopolies?
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