Life-Cycle Demand for Major League Baseball, pp. 79-93

Seung C. Ahn and Young H. Lee

Static microeconomic theory predicts that monopolists set prices in the elastic range of the demand curves for their products. However, for nearly thirty years, most of the empirical studies of sports-game attendance demand have failed to support this prediction. This paper shows that in a multiple time-period model, professional team owners are likely to set ticket prices at which attendance demand is price-inelastic if the intertemporal elasticity of substitution for games is small and/or if attending games is habit-forming. Our empirical study shows that these two conditions hold for Major League Baseball (MLB) attendance. This result is consistent with the notion that inelastic pricing would be the outcome of MLB owners’ rational decisions.