Nhl Profit Maximization Case Study
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Nhl Profit Maximization Case StudyDo NHL teams profit maximize? Explain how the authors come to this conclusion.
Before we dive into the details on whether the NHL team or any sports team for that matter maximize profit, it would be worthwhile to answer 2 basic questions as put forth by the author:
Would a sports fan not go to a game which he is die-hard fan of because he/she thinks the team profit maximizes?
Would a sports team forego additional revenue?
As with any commodity, price of an arena seat is set by supply and demand. This is why it always rings false when NHL execs try to link ticket prices to player salaries.
Any sports game ticket demand in North America is influenced by a number of factors:
Changes in per capita consumer income
The number of consumers in a given market
Changes in consumer attitudes, tastes, and/or preferences
Changes in the price of a complementary product
Changes in the price of a substitute product
Factors Influencing the PROFIT GOAL of the FIRM
What is Market Equilibrium and Why is it Relevant in this Context?
The market for sports tickets, or any other product, comes into balance—into equilibrium — when the quantity of tickets that fans demand equals the quantity of tickets that teams supply. Markets are said to be in balance when:
1. Sellers are satisfied with the quantity they are selling at a certain price.
2. Buyers are buying all they want at that price and would not want to buy more at a higher price.
But in everyday economic life, markets seldom, if ever, reach a state of equilibrium because supply and demand are continually changing.
During the 1990s, demand for sports tickets remained strong in most major markets, while the supply of tickets remained constant. More people with extra money to spend were competing for a fixed number of seats, and that’s why ticket prices raised so much in major markets.
But in markets where demand was weak, ticket prices rose less because it’s...