Market Power, Exclusive Rights, and Substitution Effects in Sports

• Published date: 01 September 2016
• DOI: 10.1177/0003603X16657228
• Date: 01 September 2016
• Subject Matter: Articles

Article

Market Power, Exclusive Rights,

and Substitution Effects in Sports

Brian M. Mills* and Jason A. Winfree**

Abstract

This articles argues that consumers of professional sports leagues are not always better off with more

sellers because market power can be exerted in many ways. In the presence of one governing body,

allowing individual firms to sell a product can be more harmful than a monopoly. Some recent antitrust

lawsuits dealing with North American sports leagues have focused on collective sales through the

league compared with competitive sales through teams. This paper gives examples where it is not clear

that team sales are better than league sales. Furthermore, we argue that market power depends largely

on fan substitution within and across leagues, including NCAA sports. We give a summary of recent

research in the area of fan substitution, and suggest directions for future work on understanding

substitutability and impacts on market power of professional and collegiate sports teams.

Keywords

sports leagues, substitution, competition

Introduction

In 2012, liquor sales in Washington State went from being sold directly from state-run liquor stores to

privatization, where liquor was sold in grocery stores. This initiative was passed by voters, and a

primary argument behind this legislation was that liquor prices would decrease since sales were going

from a state-run monopoly to the very competitive grocery store industry. But to the surprise of many

consumers, prices actually spiked up once the policy went into place.

1

The reason for this was that the

state did not want to lose money under the new legislation, so they initiated a series of taxes and fees on

liquor that more than made up for the price decrease via competition. So while liquor sales did

*Department of Tourism, Recreation, & Sport Management, College of Health & Human Performance, University of Florida,

Gainesville, FL, USA

**Department of Agricultural Economics and Rural Sociology, College of Agricultural and Life Sciences, University of Idaho,

Moscow, ID, USA

Corresponding Author:

Brian M. Mills, Department of Tourism, Recreation, & Sport Management, College of Health & Human Performance, University

of Florida, P.O. Box 118208, Gainesville, FL 32611, USA.

Email: bmmillsy@hhp.ufl.edu

1. See Vanessa Ho, Liquor Sticker Shock: Why Is Booze So Expensive? SEATTLE PI, May 31, 2012, http://blog.seattlepi.com/

seattlepolitics/2012/05/31/liquor-sticker-shock-why-is-booze-so-expensive/#5511101¼0.

The Antitrust Bulletin

2016, Vol. 61(3) 423-433

ªThe Author(s) 2016

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DOI: 10.1177/0003603X16657228

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