Micro- End of Unit Blog Assignment
We've just wrapped up our unit on Product Markets and Market structures.
It's also NCAA Final Four Weekend, one week from the NCAA Frozen Four (Hockey's equivalent of the Final Four, but they can't call it that for copyright reasons), the Employment situation report released today showed the US unemployment rate rising to 8.5% and another 663,000 jobs lost--- including one CEO of GM, Rick Wagoner at the urging of the White House.
Your blog for this unit can take one of two directions-- 1) you can comment on the economics of the Final Four-- look at the enormous revenue of the NCAA v. the value of the scholarships paid. What allows the NCAA to generate such enormous revenues? Is this a moral approach?
Or, you could look at the Financial Crisis. What are the types and sizes of firms that have gone out of business or demanded relief in the form of subsidies from the Federal Government? How did market power contribute to the crisis?
Or, you could pick your own topic to show the relationship of market structure to profits and jobs.
It's also NCAA Final Four Weekend, one week from the NCAA Frozen Four (Hockey's equivalent of the Final Four, but they can't call it that for copyright reasons), the Employment situation report released today showed the US unemployment rate rising to 8.5% and another 663,000 jobs lost--- including one CEO of GM, Rick Wagoner at the urging of the White House.
Your blog for this unit can take one of two directions-- 1) you can comment on the economics of the Final Four-- look at the enormous revenue of the NCAA v. the value of the scholarships paid. What allows the NCAA to generate such enormous revenues? Is this a moral approach?
Or, you could look at the Financial Crisis. What are the types and sizes of firms that have gone out of business or demanded relief in the form of subsidies from the Federal Government? How did market power contribute to the crisis?
Or, you could pick your own topic to show the relationship of market structure to profits and jobs.
Labels: Assignments
posted by Rob Wedge at
9:55 AM
3 Comments:
The NCAA is a monopoly in the market for college basketball. If one likes college basketball, there is no other place to go. There is a lot of demand for college basketball and the demand curve is relatively inelastic. Basketball is a popular American sport and alumni, especially males, like remembering the good times they had at the games as a student. There are no substitutes available, it is habit forming, and the ticket’s prices are only a small portion of one’s income. All of the above factors allow the NCAA to bring in enormous revenue, especially during their most important time, the Final Four tournament.
There are two ways that one can receive the product of the Final Four: by going to the game and paying an admission fee or by watching CBS. The NCAA has a monopoly on the tickets and can therefore charge the highest price within the relatively inelastic demand curve (supply curve is inelastic). Each university uses its monopolistic pricing power to get patrons to donate huge sums in order to receive the best tickets the university has to offer. While this may seem extreme, basketball and football pay for the entire sports programs at most universities, so the universities must maximize revenue. The NCAA is also able to price discriminate because there are easily segmentable groups. They can easily segment the prices of seats depending on their placement and also give lower prices to students and charge higher prices to everyone else. This allows the NCAA to maximize profit at the expense of consumer surplus.
The viewers who watch the tournament on TV also make the NCAA money. Sports delivers a very important demographic for advertisers, males ages 19-49. There is no other place or time when all of those males gather in such numbers. Therefore, demand for advertising space is heavy (relatively inelastic) so networks can charge lots of money. NCAA charges networks enormous amounts for rights to broadcast the Final Four because they know the network will be able to make lots of money from advertising.
As one can see, the NCAA basketball is very profitable for everyone except the athletes. Athletes do not share materially at all in the revenues they help create. They do receive scholarships but in free market, because people are paying to watch the athletes, they would be able to demand some portion of revenue stream from both the ticket sales and the revenue they would bring in from the networks. The value of a scholarship is only a portion of what universities would have to pay athletes if a free market existed. However the athletes must settle for just the scholarship because they have no other options (unless they are already good enough for professional sports).
Is this the moral approach? While athletes may not be getting all of what they technically deserve monetarily, they do receive free educations at elite institutions they may not otherwise be able to attend. They also have a stepping-stone for the professional leagues, which are very profitable. However, it is difficult to find another industry where the labor receives such a small percentage of the revenue stream. If one looks at it completely from a financial standpoint, the athletes are not well paid; however, if one looks at the opportunities they have been given and the platform that their college education provides, the athletes are probably better off than they would be otherwise.
By
Caroline O, at 9:21 PM
Michigan State vs. North Carolina: two of the biggest schools competing for the NCAA championship title. Typical. The actual profit that this game will bring in not only benefits the NCAA basketball monopoly, but the other monopolies that contribute to the final affair. CBS being the only network that airs the games? Ford Field in Detroit hosting the final game? The scholarships the schools offer to their players? All these things play a part to make the NCAA March Madness actually madness.
The NCAA has been putting on March Madness since 1939 and since then, the month has March has lost its true meaning from Easter and warm weather to sitting in front of a television and filling out brackets. Since the NCAA is the biggest basketball tournament, it can charge prices according to the social optimum (and often incredibly high because some people want to feel the players’ sweat. Gross) and there are only a limited number of seats in the arena, so only the crazy people who pay the expensive tickets will get them. The NCAA also price discriminates its ticket sales, because tickets are easily segmentable. They give some form of “free tickets� to students and the “best seats� to the large donors and important alumni. During March, college basketball pulls in huge revenue, often making the most out of the entire season to make up for earlier in the season.
For the lazy people or the non-devoted fans, TV is the best way to watch the games. For the past few years and for years to come, CBS is the only network that airs the games. They know that men will sit down and turn on to CBS because most men will want to watch the game year after year (making it habit forming) and wil do anything to watch the game. CBS does this strategically to have no other substitutes, making the demand curve more inelastic. Most men will find March Madness a necessity also making the demand curve more inelastic. This form a monopoly will last a long time because of past years habits and increasing profits.
We all want scholarships. Athletic scholarships are ideal, but there are only certain amounts that can be given each year. UNC is loosing some major players due to being seniors, but have five freshmen coming in to replace the spots. The selectivity of those scholarships are very rare (one is actually coming from Richmond) and monopolistic. Coaches pick the top players around the US discriminating against other players and their ability. The revenue that the players themselves bring in contribute to the over profit. Their scholarship price will eventually be covered over the 4 years they play for that school.
By
kmelnick, at 10:16 PM
The financial crisis today is putting America in a vulnerable position for the future. With a new president, and new white house officials, America is in need of help and we need it fast. Businesses are struggling to keep up with their rent and pay their workers salaries.
Large firms, like AIG, have been shut down despite all the efforts made by the government. A lot of large firms have been taken down quickly because they were the ones least expecting it. Large firms have been spending money for the past couple years without looking ahead to what could happen in the future. Their greediness and fight for power in years past have left them unprepared for this economic crisis. They fell hard when the economy began to go downhill in September.
Smaller business’ like, Circuit City, have also been shut down. The government lent Circuit City money, but it was too late for them. Small and large firms are being affected by the financial crisis. When the businesses suffer, so do its employees. Unemployment is at a record high as well. “…the unemployment rate is continuing to climb, hitting 8.5 percent in March…� This is the highest level since November 1983. This economic collapse is affecting everyone from large to small firms.
Retail, Financial and Professional businesses, manufacturing and construction industries have all had to cut back in order to maintain there place in the business world. The first thing to go is the laborer. To keep their head above the water, firms have cut back big time creating an even worse problem of unemployment. If everyone is jobless how are civilians supposed to support the businesses and consume the goods they are producing? If there is no profit being made, businesses cannot flourish like they need to in order to make ends meat. It is a vicious circle that will not stop until our economy gets to where it needs to be.
Quote from: The new economy blog
http://features.csmonitor.com/economyrebuild/topics/?topic=5336
By
Hillary, at 10:41 PM
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