Essay Market Structure of Professional Sports

2002 Words Mar 9th, 2013 9 Pages
Research Paper:
Market Structure
Professional Sports

ABSTRACT

Economic theory introduces us to four different types of markets: perfect competition, monopolistic competition, oligopoly, and monopoly. Professional sports teams operate in an environment that is different than the typical business structure. The goal of this paper is to look at this industry, in particular the NFL, in an economics context and gain an understanding of the market structure of this unique industry. To do this I will discuss a brief history of the National Football League in the U.S. and how this organization is structured. I will also discuss typical market structures and type of
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Each team can have a maximum of 53 players making up their offense, defense and special teams units. With a minimum salary of $230,000 (for players in their first season, the minimum goes up with veteran status), the absolute minimum total salary for NFL players is a staggering $390 million. What is more astounding is the actual number is just under $3.4 billion in salary.[3] The league is separated into two divisions and each division is then separated by region. The following chart reflects the current layout of these divisions and regions.
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Table 1 – Current layout of NFL Teams[4]

Overview of Market Structures In economics, markets are classified according to the structure of the industry serving the market. Industry structure is categorized on the basis of market structure variables which are believed to determine the extent and characteristics of competition. Those variables which have received the most attention are number of buyers and sellers, extent of product substitutability, costs, ease of entry and exit, and the extent of mutual interdependence. In the traditional framework, these structural variables are distilled into the following taxonomy of market structures: • (1) Perfect Competition--many sellers of a standardized product, • (2) Monopolistic Competition--many sellers of a differentiated product, • (3) Oligopoly--few sellers of a standardized or a differentiated product, and • (4)

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