irms, and other legal issues that must be considered. An investor would initially need cash for payroll of players, payroll for management, advertising, playing facility, and many other miscellaneous costs. The new franchise owner would need to be very wealthy and have the backing of other wealthy individuals just to purchase the franchise. Once a franchise eventually enters the market, they have the ability to set the prices for that particular market. Monopolies are price makers and the products offered are not sensitive to changes in the market. The demand curve of a monopoly is not elastic, as is such in a perfectly competitive market. The monopolistic demand curve is the same as the curve for the industry since there is only one firm within the industry. This allows the franchise owner to maximize profits by setting the price of tickets and concessions at an amount that creates the most revenue. Consumers will pay the price, if they want to attend a particular sporting event, no matter how outrageous the price. This price setting is allowable, because unlike perfect competition, there are no substitutes. Cities may have two or three teams of different types of sports (i.e. baseball, hockey, football), but few cities have more than one professional team of the same sport. Sports franchises, although theyre monopolies are not all bad. These teams bring million and millions of dollars in revenue to the city in which theyre located. First of all, jobs are created in the construction of the sports facility. Then there is revenue to the city from taxes, consumer spending at hotels and restaurants, tourist visits and numerous other avenues. Sports franchises are similar to the fast food industry in the respect that they also have a very high utility value. ...
