Public Subsidies and the Location and Pricing of Sports

Using public choice analysis, we determine how government subsidies affect location and pricing decisions of sports teams. We explain how voter referendums can create suboptimal outcomes for local communities and identify winners and losers in sport team subsidies. Subsidy bidding leads to higher subsidies and fewer sport franchises but does not alter team location. Sport subsidies generate additional revenue for owners and players at taxpayer expense, and non‐fan taxpayers subsidize both the team and fans. To increase political support for subsidies, teams lower ticket prices below the apparent profit‐maximizing level, which may cause inelastic ticket prices and ticket shortages.