Profit-Maximising Sports Franchises II

This lecture sets up a formal model of sports team behaviour (from Rod Fort), working from the common starting assumption of profit-maximisation (though noting certain caveats to this). We model one particular factor of production, labour (players' wages), and see how the teams' decisions on amount of labour affect not only revenues, costs and ultimately profits, but also team quality and how often they 'win'. These conclusions then make it possible to infer a few useful conclusions about the way the sports industry works, particularly in North America. Copyright 2012 La Trobe University, all rights reserved. Contact for permissions.