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April 30, 2003

Lies, Damned Lies

Ticket Prices vs. Player Salaries

by Nate Silver

You've been hanging 'round these parts long enough. You've heard the party line, once or twice or 20 times: Higher payrolls don't result in higher ticket prices. Correlation is not causation. Salaries don't shift demand curves. It's Economics 101. Simple, textbook stuff.

The problem with this line of argument--the problem with a lot of economically-based arguments--is that it's easy to let the theory get ahead of the data. Well, I should state that more precisely: It's easy to let an oversimplified theory get ahead of the data. A lot of what you learn in Economics 102, and Economics 201, and graduate-level classes that I was too busy drinking Boone's Farm to take advantage of, is that much of the theory you master in an intro-level class is based on a particular set of assumptions that can prove to be quite robust in certain cases, and utterly misleading in others.

A lot of people shun economics for this very reason--we've all had coffee shop conversations with the scruffy, Skynard-mangling philosophy major who is fond of spewing out faux-profundities about the irrationality of human nature. He's missing the point, of course, but so too is the Ayn Rand-spouting prepster from down the residence hall who conflates assumptions with hard rules.

In either case, a little bit of knowledge is a dangerous thing. Economics, though it sometimes harbors pretensions to the contrary, is above all else a behavioral science, and an empirical science. If the theory doesn't match the data--well, it's not the data's fault. This is especially important to keep in mind when evaluating something like ticket prices to baseball games, a commodity that is unusual in many ways. As we've stressed frequently, ticket prices ought to be almost wholly determined by demand-side behavior--the marginal cost of allowing another butt in the seats is negligible. But baseball tickets are unusual in other ways, too: They're very much a luxury good, and their prices are determined by a finite number of decision-makers who may be subject to conflicts of interest. It's certainly worth evaluating the available data to see whether we can put our money where our mouth is.

In order to study the question, I looked at time series data for the 15 clubs who have remained in the same ballpark since 1991, excluding expansion teams, and teams who have a more valuable product by virtue of playing in a nicer ballpark. The complete list includes: Anaheim, Boston, Kansas City, Los Angeles, Minnesota, Montreal, Oakland, Philadelphia, St. Louis, San Diego, Toronto, and two teams each in New York and Chicago. All data was gathered from Doug Pappas' website, with the exception of the 2003 numbers, which are available for free from Team Marketing Report.

Average ticket prices for the 15 teams in the study, adjusted to 1995 dollars based on the consumer price index, are charted below: