Professional sports: Non-rival (and non-excludable)

This year, the soccer club DC United moved into a brand new stadium. Among the controversies surrounding this move was the role of public funds, by some estimates accounting for half the cost. While the merits of this funding scheme are grounds for debate elsewhere, it did get me interested in the placement of professional sports teams more broadly on the “public-private spectrum.” On the one hand, the stadium experience is on the private end of the spectrum. It is rival (we can’t both sit in the same seat) and excludable (if you don’t have a ticket, you will get turned away at the front gate). However, the more abstract act of “consuming” the “fandom experience” shares neither of these qualities. My being a  fan does not affect your ability to be a fan, and there is no reasonable way to exclude anyone else from being a fan. Assuming that one derives benefit from their fandom regardless of one’s level of financial support for the team, it seems to have the makings of a public good. To support this analysis, assume professional sports operate in a free market (which given the earlier DC United example, we know is not the case).

Extending the idea, if you apply Buchanan’s intuition from A Theory of Clubs to professional sports, the good’s “publicness” is revealed even further. Nobody wants to be the only person cheering for their team. As such, the optimal “N” of people to share a fandom for a professional sports team is high. This high optimum “N” combines with the cost saving features of collective membership to motivate a possible public provision of the good.

Public provision could help address the market failure associated with pro sports fandom. To illustrate this point, suppose there are two fans of the Detroit Lions, each representative of a different sector of the fandom: Lee and Matthew. Lee is a die-hard fan: he holds season tickets and has a den decked out with Lions merch. Matthew is also a fan of the Lions, he derives a lot of benefit when they do well. Unlike Lee, however, Matthew only occasionally watches Lions games at his local sports bar, keeps up with scores on his local news channel, and doesn’t own any merchandise. Though both fans derive similar benefit from their fandom, Lee alone is bearing the cost, an example of a free-rider problem. Because the team management relies in part on revenue from ticket and merchandise sales to pursue top talent (athletic and administrative), this could lead to an underproduction of the good. Given this market failure and our previous assumptions, public provision might better approximate the allocatively efficient outcome.