The professional sports owner and the search for revenue: Analyzing the impact of new stadiums on team quality, owner strategy, and consumer cost

In three essays, this thesis examines the effect of stadium-generated revenue on owner behavior, team performance, and product pricing in professional sports. In the first essay, this thesis models league and owner behavior in a one period setting. Owners maximize team value by selecting quality subject to a budget constraint. With owners seeking to maximize team value, all budget resources are exhausted in a second price auction. The result shows that owners with larger budget sets are able to dominate the league in expectation. Small market teams must acquire greater budget resources to narrow quality differences between teams. The first essay concludes by empirically testing the model. Tying player quality to career performance, the data show that teams with greater experience and talent perform better in expectation.;In the second essay, a dynamic model is created where owners select quality and investment each period. The owner makes the inter-temporal tradeoff between current and future quality. The results show that the owner with the greater resources invests more than the small market owner while maintaining greater quality in each period. The model shows that small market owners can reduce differences in team value with revenue from a new stadium. The empirical portion of the paper shows the effect of a new stadium on total revenue, team payroll, and team performance to be positive and significant.;The third essay is motivated by findings from the second essay. While a stadium has a marginal impact on team quality, a question remains as to its effect on product pricing. The third essay examines factors that determine pricing of the sports product for the spectator. After describing a model of team revenue, the essay forms a cross-sectional, time series of pricing data for major professional sports in the United States. From this data, the impact of a new stadium on product pricing is determined. Results show that frequency of games played, past performance, and income are determinants in the pricing of events.