The Demand For NFL Attendance: A Rational Addiction Model

Abstract

<p class="Textbody" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">This paper examines the demand for attendance at National Football League (NFL) games using a rational addiction model to test the hypothesis that professional football displays the properties of a habit-forming good.<span style="mso-spacerun: yes;">  </span>Rational addiction theory suggests that past and future consumption play a part in determining the current period’s consumption for habit-forming goods.<span style="mso-spacerun: yes;">  </span>Additionally, we postulate the behavioral implications of profit-maximizing ticket pricing behavior by NFL teams.<span style="mso-spacerun: yes;">  </span>Previous studies have been unable to detect pricing power by NFL teams.<span style="mso-spacerun: yes;">  </span>Our model of pricing power allows us to identify theoretically- anticipated pricing behavior.<span style="mso-spacerun: yes;">  </span>A pooled data set is collected using statistics from each NFL team from the 1983 to the 2008 seasons.<span style="mso-spacerun: yes;">  </span>Current attendance is modeled as a function of team specific variables, including past and future attendance, ticket price, and team performance.<span style="mso-spacerun: yes;">  </span>The model is estimated using Two-Stage Least Squares (2SLS).<span style="mso-spacerun: yes;">  </span>We also treat the censored nature of ticket demand as NFL teams frequently experience sell-outs.<span style="mso-spacerun: yes;">  </span>It is found that past and future attendance, winning percentage, the age of the stadium in which a team plays, and own-price demand elasticity influence attendance.<span style="mso-spacerun: yes;">  </span>The fact that coefficients for past and future attendance are positive and significant in this analysis lends support to the notion that NFL fans display characteristics of rational addiction in their consumption behavior.<span style="mso-spacerun: yes;">  </span>Further, we find evidence to support profit-maximizing behavior in ticket sales.</span></span></p>