Arthur: Big contracts don’t make tickets more expensive

From SABR member Rob Arthur at Baseball Prospectus on March 22, 2019:

Between the $426.5 million extension Mike Trout signed this week and the $630 million in free agent contracts given to Bryce Harper and Manny Machado, baseball seems awash in huge deals. The hundreds of millions spent prompted the usual criticisms from a certain segment of baseball fandom, ranging from specious comparisons to the country’s median income to complaints that, incredibly, Trout would be overpaid (not even close).

But perhaps the most objectionable critique is that contracts like those signed recently by Trout, Harper, and Machado will single-handedly increase ticket prices. A well-established body of economic literature shows that ticket prices are primarily the product of huge demand for a limited supply of seats and don’t spike because of high-dollar deals.

At first glance, a connection between player salaries and ticket prices seems reasonable. As expenses increase, the thought goes, owners claw back profits by pushing prices higher. It’s what you might do if you were, for example, running a lemonade stand and the price of lemons jumped.

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Originally published: March 25, 2019. Last Updated: March 25, 2019.