Estimating Local Welfare Generated by a Professional Sports Team Aju Fenn & John Crooker

Threat of Relocation The relocation of teams is not uncommon St. Louis Rams; Minnesota North Stars Vikings were seeking a new stadium possibility of them relocating was credible. Examine the welfare contribution of the Minnesota Vikings to Minnesota households. Economists were interested in estimating the willingness-to-pay for a new stadium Vikings should be valued as a public good This study/survey takes a look at the WTP for a new stadium. Utilizes contingent valuation methodology (CVM) and random utility model (RUM) Develop an unbiased approach to identify welfare when respondents perceive a risk of losing the franchise. Key to any reliable survey is the credibility of the scenario Timing needs to be right when dealing with the issue of ‘realism Jaguars were in a similar situation, but did not get beneficial results

Continued WTP indicates the maximum amount of money the respondent of the survey would be willing to pay Findings from respondents who believe the Vikings will be sold and relocated are compared to those who do not believe the team will relocate Unless the survey matters to the individual, he/she believes that their response matters, there is no way to consider the survey “consequential” The Vikings survey poses questions in an incentive compatible framework 50% of the respondents believe Vikings will move if they do not get a new stadium Goal is estimating respondent’s WTP Goal is estimating respondent’s WTP Would you be willing to pay $B out of your own pocket for next year to make a new stadium possible? Would you be willing to pay $B out of your own pocket for next year to make a new stadium possible? How are the bids determined? How are the bids determined? SDP SDP 3 of the 4 bid amounts were under $30 3 of the 4 bid amounts were under $30

THE SURVEY METHODOLOGY SECTION 1 Games viewed and fan interest – $ spent on team merch – Travel time to/from stadium – # of MN sports teams the respondent (i) follows 41% claim to read Vikings football news on a daily basis 44% discuss Vikings fortunes with friends/family 18% consider themselves die-hards 13% felt the absence of the Vikings would decrease their level of fun by “a great deal” SECTION 2 Outlines payment scenarios and solicits payment Outlines payment scenarios and solicits payment a new stadium is between $ million. a new stadium is between $ million. Estimated individual cost of this stadium to the quoted amount below Estimated individual cost of this stadium to the quoted amount below 1 time payment of $5, $10, $25, or $100 depending on which survey was received. 1 time payment of $5, $10, $25, or $100 depending on which survey was received. $5 – 15% agreed to pay $5 – 15% agreed to pay $10 – 50.8% agreed to pay $10 – 50.8% agreed to pay $25 – 50% $25 – 50% $100 – 33.3% $100 – 33.3% Solicits demographic info Solicits demographic info 73% male 73% male 19% single 19% single 93% white 93% white 82% lived in MN for 20+ years 82% lived in MN for 20+ years 51% had a college degree or higher 51% had a college degree or higher Avg income was $57,000 Avg income was $57,000 SECTION 3

Determinants of the WTP o Dependent variable WTP o 1 with a ‘yes’, agreeing to the bid o 0 for ‘no’ o The above equation tests the hypothesis that the WTP for a new stadium depends on the following variables o Amount o Income o Public good o Spend o Prestige o Winsuper o Leave o Twins o UofM o Z

PROBIT Technique used to estimate the WTP PUBGOOD, SPEND, UofM all positive and significant CREDIBILITY Is this really measuring the value of the Vikings franchise? Sample split into 2 different categories Results aren’t considered when projecting a value for the franchise.

Heterogeneous Credibility Beliefs Individuals who feel the Vikings will relocate without a new stadium are valuing the Vikings franchise in their response Individuals who feel the Vikings will relocate without a new stadium are valuing the Vikings franchise in their response On the surface, this question allows researchers to infer value for a new stadium On the surface, this question allows researchers to infer value for a new stadium Purpose of entire thing is to measure the value Minnesotans place on the Vikings Purpose of entire thing is to measure the value Minnesotans place on the Vikings 55% of respondents believed the Vikings would relocate without a new stadium. 55% of respondents believed the Vikings would relocate without a new stadium. Individual’s belief regarding relocation is noted as such: Θ i Individual’s belief regarding relocation is noted as such: Θ i The respondent who does not believe the Vikings will relocate and does not perceive a potential loss of the Vikings answers ‘NO’ The respondent who does not believe the Vikings will relocate and does not perceive a potential loss of the Vikings answers ‘NO’ When answered ‘YES’, pays the bid amount, is certain Vikings remain in MN and receive new stadium When answered ‘YES’, pays the bid amount, is certain Vikings remain in MN and receive new stadium

How Bids Were Perceived HOW BIDS WERE PERCEIVED Columns: respondents who believe the Vikings are that percentage likely to relocate without a stadium Rows: indicate the bid levels the respondents received As the respondent believes the Vikings are more likely to relocate, he becomes more willing to fund the stadium

Welfare Minnesotans Associate With the Vikings Avg welfare for the Vikings is $756.6 M Confidence interval for the welfare contributions of a new stadium are between -$706 M and -$169M Avg welfare with combining a new stadium and the Vikings is $321 M

Bottom line Pure value can only be possible if able to calculate a Choke price – Threshold that if not met results in the loss of resources Vikings relocating without a new stadium Even though the discussion generally was about the potential of a new stadium being built… Benefits of action must be weighed against sacrifice of decision Strong evidence that Minnesotans do not want such construction