J.C.H. Jones's article "The Economics of the National Hockey League" (1969) purpose is to
explain through simple micro economics that the prime motive of professional hockey team
owners
is profit maximization. The owners argue that their main interest is "for the love of the
game," not the
financial benefits of owning a professional sports franchise and to avoid government
regulations such
as the Combines Act (note 1).
An article written in 1982 by J.A. Schofield entitled "The Development of First Class
Cricket in
England," states the behavior of sport cartels. Three hypothesises are used to explain
the behavior
described by Schofield, number two being developed by J.C.H. Jones (1969). (1) The
profit
maximization hypothesis. (2)The joint profit maximization hypothesis that the entire
cartel (league)
strives for. This hypothesis does not incorporate non profit objectives that influence
group behavior.
(3) The utility maximization model that allow for many possibilities usually compromising
arguments
such as the success of the team at a given year and paid attendance for the team's venue.
By explaining the frame work of a professional sports league Jones introduces us to
factors that
make an organized league function, which seems quite familiar to any other monopolistic
markets.
Since no team can create any revenue by themselves they must form a coalition with
another club to
produce a profit generating output, namely a hockey game. Other clubs enter this
coalition thus
creating a formal league which we call the National Hockey League. Jones then states how
revenue
is generated in the N.H.L and how it is affected by certain factors.
A theoretical model of the N.H.L is created by Jones with all things being equal,
creating an
equilibrium amongst all clubs. The model is then adjusted to real life variables that
turns his
theoretical model into what we know as the N.H.L. Jone's variables includes the incentive
for teams
to win (this being the Stanely Cup), different quality of players, the amateur draft (a
draft at the end
of the season which amateur players a selected, last place team gets first pick and so
forth), and
player redistribution(trades).
By applying microtheory Jones clearly presents his argument which I was able to
understand with my current knowledge of microeconomics. Jones examines the revenue side
of an
individual team using the usual variables tastes, prices, incomes, quality and
substitutes. On
the supply side Jones stresses that the major element is the human inputs namely the
hockey
players. The data that Jones used was team statistics such as their final rank at the end
of the season
and the paid attendance as a percentage of maximum seating capacity. By using this data
Jones is
able to establish trends that arise from season to season, thus helping him establish his
argument on
profit maximization.
Jones article is meaningful at the moment because of the current labor disputes amongst
the players
and the owners. "The Economics of the National Hockey League" states what the N.H.L.
should be
and also indicates what is wrong with its current status. The current issues pressing the
N.H.L. such
as a salary cap, revenue distribution, and league expansion are all measures that the
team owners
are striving for. By installing these measures into the N.H.L. the equilibrium achieved
in Jones's
theoretical model would be easier to achieve thus maximizing the owner's profits. One
variable that
Jones could not foresee in 1969 is the outrageous salaries being paid to the players and
the
proposed salary cap from the owners. I believe that Jones's argument that owners motives
are
purely geared towards profit maximizing would be stronger if the idea of a salary cap was
present
then.
Jones concludes that the National Hockey League is profit driven and clearly posses
monopolistic
qualities. Upon proving this through simple micro economics the N.H.L. can fall under
certain
government regulations such as The Combines Act. Since this article was written in 1969
many
changes have been made to the governing bodies that control the National Hockey League
however
its functions can still be explained through micro economics.
REFERENCES
1.The Combines Act. R.S., C314 s.1, 1966
2. J.C.H. Jones, "The Economics of the National Hockey League", Canadian Journal of
Economics,
vol 2 (February 1969), pp. 1-20
3. J.A. Schofield, "The Development of First-Class Cricket in England: An Economic
Analysis",
The Journal of Industrial Economics, vol. 30, no.4 (June 1982), pp.337-360
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