Market Power

Musings by an academic economist on the power of markets and the power over markets.

Friday, December 17, 2004

Twins' Arbitration Eligibles.

In other Twins news, the Twins are going to offer pay cuts to some of the arbitration-eligible players. In baseball's arbitration system, around the last week of January, each player who has filed for arbitration, along with his team, makes a so-called "final offer". Then during the next one to three weeks, roughly, the two sides can continue negotiating. If they can't strike a deal, then each side presents its "final offers" to a three-person panel of arbitrators and argues why its offer should be chosen. After they make their cases, the arbitrators render a decision by picking one of the two "final offers" and the two sides are bound to honor the arbitrators' decision.

The final offers aren't really "final" at all because the two sides can continue to negotiate a deal after the setting of "final offers." But that's what this form of arbitration is referred to. The other kind of arbitration, conventional arbitration, is a system in which the arbitrator may pick any settlement that he/she sees fit. This is what's used in hockey.

Arbitrators are thought to have some "preferred settlement" in mind - a settlement that satisfies some objective of the arbitrators. The negotiators have expectations about this preferred settlement, and each sets tits offer to make itself as well off as possible. Then, when rendering a decision, the arbitrators pick that final offer that is closest to their "preferred settlement".

The factors that arbitrators can consider when rendering a decision are precisely spelled out in the Collective Bargaining Agreement. Arbitrators can consider, among other things, "comparable baseball salaries", including free agent salaries. When large contracts get signed in the free agent market, their terms tend to filter back into the arbitration system.

So, assuming that the Twins don't just nontender some of their arbitration eligibles (let them become free agents), the Twins can offer pay cuts. But with the way the free agent market is going, those pay cuts could just possibly push any potential arbitrator to choose a player's offer should the case go to a hearing.


Thursday, December 16, 2004

More Stadium Bills in Minnesota

Bills for two stadiums are going to be put in front of the Minnesota State legislature: one for the Twins (the Twins may be Las Vegas's new honey next week) and one for the Gopher football squad (they aren't going anywhere). Right now the Gophers have the most support because their stadium is cheaper (no roof) and the current proposal calls for the university to raise 60% of the costs on its own.


A New Suitor for Les Expos

Las Vegas wants in on the Major League Baseball party. Now Las Vegas Sports and Entertainment is looking to try and bring the Expos to town. I guess the Marlins are just sooooo yesterday.


Dadgummit, Please.... GO AWAY!

A little rest (or a little hair of the dog) will get rid of a hangover. There's lots of ways to get rid of a vampire. A silver bullet should do the trick if you find yourself face-to-face with a werewolf.

But the University of Missouri basketball program cannot rid itself of the riches of embarassment that continues to crop up regarding former point guard and Roots fan Ricky Clemons. The jailhouse tapes of phone conversations between Clemons, the wife of the MU president, and the wife of the assistant athletic director were embarassing enough. The probation that the MU basketball program is now on was supposed to be the capper to this sad saga.

But like an annoying girlfriend, or worse, a stalker, it won't go away.

A little history for the unitiated: in 2002, point guard Wesley Stokes (he of the flowing dredlocks) left MU to return to Southern California, leaving Mizzou without a starting point guard. Coach Quin Snyder was in a pickle, but found and recruited Ricky Clemons to come to MU to be his point guard.

The latest thing to pop up, like another zombie in those "Night of the Living Dead" movies, is that Clemon's coach at Barton County Community College in Kansas (BCCC), Ryan Wolf, has been indicted in a variety of things related to academic fraud. What did he allegedly do? "What didn't he allegedly do" is a more efficient question to ask. Among other things, Jeff Gordon gives this gem in this column:

" the allegation that Wolf paid for some of Clemons' classes with HIS PERSONAL CREDIT CARD.

"Even by Kansas JUCO standards, that's incredibly dumb. "

I bet Wolf's relatives are proud of him today.

One question that has always surrounded this fiasco about Clemons is this: he never graduated from high school. Similar to Barbara Streisand's character in What's Up Doc, he attended several high schools, but never graduated from any of them. After the 2002 basketball season at the College of Southern Idaho, Clemons left school - midway through the semester - with 24 credit hours to go for his degree. But he got into ol' Mizzou and was eligible to play basketball! How did he become eligible? He enrolled in BCCC and, as Jeff Gordon puts it:

"After bolting the College of Southern Idaho in mid-semester, he was nowhere near eligible to enroll at Missouri and play NCAA Division I basketball. Fortunately, he was able to "earn" 24 credit hours during one presumably busy summer at BCCC . "

But one woulda thunk that coach Snyder would have raised an eyebrow when he learned that a recruit who needed 24 credit hours to become eligible somehow got those hours in*ONE SUMMER*. According to this website for the College of Southern Idaho (CSI), from which Ricky was trying to obtain his degree, a student needs to have between 64 and 70 total credit hours completed to get an Associates Degree. So in two years, he would have completed between 40 and 46 credit hours, or between 10 and 11.5 credit hours per semester. He completed over twice that number of credits in one summer? I'm not saying it can't be done, but 6 hours is often considered to be a full load - and Clemon's prior academic history suggests he would have been one of the last students we'd expect to do this. According to this article from the Columbia Daily Tribune, Ricky had never picked up a book until he was thrown in jail after coming to Mizzou and his GPA for his first semester at CSI was 1.779. Bringing in Clemons was a huge risk and an incredibly dumb move, and now it's the gift that keeps on giving.

A primary reason why this garbage occurs in college is that many college players, especially those on football and men's basketball squads, generate much more revenue than they receive in compensation, generating substantial rent for those schools (economic rent is the difference between what a resource generates and what the resource receives in compensation). Because the rents are so high, there is tremendous competition between schools to recruit players. The policy makers at the NCAA realize this, so they have, over the years, put restrictions in place to control the way that athletes can be recruited and compensated. But this does not alter the revenue generating capability of the players, so resources are employed to find ways around the restrictions. The NCAA responds by putting more resources and restrictions in place in hopes of limiting the malfeasance. Then more resources get put into finding ways around the new restrictions, and on and on and on! It's a big, costly game. .


Wednesday, December 15, 2004

Why Keep a Football Coach Who Loses?

Besides being a football coaching legend and a philantropist to Penn State, PSU head football coach Joe Paterno is also "the university's most valuable fund raiser" according to this article in The Chronicle of Higher Education (subscription required).

Here's an excerpt from the article:

""He and I were once on a donor visit together," recalls Graham B. Spanier, the university's president, in an e-mail message. "We had rehearsed ahead of time that I would describe the project and that Joe would then ask the donor for the lead gift of $3-million, a figure our development folks had determined was the maximum we could ask for.

"When it came time to ask for the donation, Mr. Paterno spontaneously upped the ante by $2-million."My heart skipped a beat," Mr. Spanier says.

The donor, however, pledged the $5-million."

So the PSU football team isn't winning like it used to and attendance is down. But PSU's president believes that replacing Joe Pa as head coach would probably hurt university donations more than than it could help football revenues.


Markets for Roster Spots

Alex Tabarrok at Marginal Revolution has this post on students trading spots in full classes. Next semester, I am slated to teach three sections of Principles of Microeconomics and all three of the sections are full. I've had several requests from students for overrides into one of my Micro sections, but I declined in each case because I don't have enough desks in the classroom.

Yesterday, I gave finals to two Macro sections yesterday and had two students tell me that they were enrolled in one of my Micro sections next semester (8:00) and wondered if they could get an override into one of my other sections (a 3:00 or a Monday night class). Both explained that when they registered for my class, the only class with open spots was my 8:00 class. They admitted that they didn't want to take a class so early in the morning. I declined to give them an override and told them to keep checking the availability of spots in those classes. When the last student left, I wondered if students traded things to acquire a spot in a full class. The answer is yes.

Students generally don't care for classes that start at 8:00 AM. The most popular start times are between 9 and 2 - Friday afternoon classes are not very popular either. One of the reasons it takes so long for the 8:00 classes to fill up relative to later classes is that the students pay the same price for each class, regardless of the time it's offered, although the demand for these classes (and the costs of providing them) are quite different from one another.


Tuesday, December 14, 2004

The Big Four-Oh

Like Steven Wright wryly said, paraphrased of course, how do you know when you are middle aged? You take your age at death and divided by 2.

I am, most likely, officially in middle age right now. I turn 40 today and am celebrating it by giving two finals and correcting another.


Monday, December 13, 2004

More On The Marlins

I'm still scrounging around for some free agent information and I ran across this article in the San Diego Union-Tribune. Seems that the folks that run Pro Player stadium in Miami have told the Marlins that they are not welcome to play there after the 2010 season. Why? Here's a quote:

"Pro Player Stadium president Bruce Schulze said 2010 is the last of a series of one-year lease options for the Marlins, who share the complex with the Miami Dolphins. He said dropping the Marlins would let the stadium pursue such events as cricket and soccer."

Cricket? CRICKET? Oy! Better yet, "Blimey." If a cricket game is going to be a better investment for the folks at Pro Player, why should a government subsidize construction of a new stadium for the Fish?


This is Downright Heartening to an Economist

Not all local newspaper columnists think that we economists are pencil-necked obstructionist clowns just because we think that public investing in professional sports stadiums are bad ideas. Check out this column by David Neal of the Miami Herald. Here's one quote:

"If the Marlins want to go to Vegas, let them go. If they want to stay here, let them build their own stadium."

Here's another:

"And the first person to mention 'revitalization' gets slapped for insulting the public's intelligence. Wasn't Miami Arena supposed to 'revitalize' Overtown? A few buildings aside, that area still looks and feels like the worst parts of Detroit."

And Miami is not alone in this regard.


Market Power in Baseball's Output Market

This semester, while lecturing about the market power held over host cities by Major League Baseball, I rattled off the names of a few big cities that may be able to (privately) support a MLB franchise. I mentioned Jacksonville, New Orleans, and Charlotte. I forgot Las Vegas. Looks like Las Vegas wants to replace its AAA franchise with a MLB franchise. The Marlins are interested in looking elsewhere. Dan Le Batard of the Miami Herald chimes in here.

The Marlins haven't been able to get public funding for a new baseball-only stadium. Le Batard complains:

"We stink as a baseball town.
Not one but two championships in the past seven years?
And we still have one of the worst attendances anywhere in major-league sports?"

Maybe this is evidence to why the Marlins are looking for public funding for a stadium: there's not enough private money available because it's simply not a good investment in Miami. The population's demand for baseball is not high enough.


D-backs and G-backs

The Arizona Diamondbacks, fresh off a 51-111 2004 campaign, are wheeling and dealing this year. It doesn't look like Richie Sexson will be back with the Snakes (there's an ex-post bad investment!), but Arizona has signed 3B Troy Glaus (who's missed most of last year and a good portion of the 2003 season with a shoulder injury) and pitcher Russ Ortiz (how will he perform away from Leo Mazzone?). Recent news reports say the D-backs are close to signing Craig (do you like the way I stand in the box?) Counsell and Royce (Marley) Clayton. They are also reportedly going after David Dellucci.

How are they going to afford all these players? They are going into debt. See here for details. A quote from the article:

"The funding comes in the form of $260 million in capital over a 10-year period - $160 million raised from the team's four general partners - Kendrick, Dale Jensen, Mike Chipman and Jeffrey Royer - and $100 million from community investors."

At least its private financing!


Sunday, December 12, 2004

Aggie List Eater - Part Deux

Boomer Sooner, baby. The OU fans are having a field day with the aTm list eater. See here.



Something bizzare happened last week at Texas A&M. While student tickets to the Cotton Bowl were being sold on campus, one coed cut to the front of the line and ate the roll call list. See here for details. Here's a quote:

"The list-eater was sold tickets, after cutting in line. Some witnesses said, after awhile the crowd started yelling 'eat your tickets.'"

What the heck is a roll call list?


Tired from all that Shopping?

Take a nap. Oh, you're not home. But you are near the Empire State Builidng? Then go to Metronaps!