1 / 6

Chapter 2

Economics 204 Sports and Entertainment Economics. Chapter 2. Economic Modeling. Economic Methodology Observation – What do you want to explain? Model Building - makes predictions and is a simplification of reality

sybill-flowers
Download Presentation

Chapter 2

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economics 204 Sports and Entertainment Economics Chapter 2 Economic Modeling

  2. Economic Methodology • Observation – What do you want to explain? • Model Building - makes predictions and is a simplification of reality • Identify the relevant variables and form a cause and effect relationship: Hypothesis • Functional Relationship • Pot = f(rain,…) • State assumptions • Ceteris Paribus – other things remain the same (constant) • Behavioral assumptions – Rational self-interest • State the hypothesis – “if-then” statement

  3. Measurement and testing (Econometrics) • Regression Analysis: statistical technique to estimate a model • Qpot = f(Rain) • Graph • Pot = 10 + 5R • (9.13) (13.3) • r^2 = .89 • F- stat = 12.3 • T – stat; t>2.00 • Adding Variables • Pot = f(Rain, labor, capital, soil, etc.) • ATT = 3 + 2.5R + .05L + 1.2K + 14S) • R Squared: Closer to 1 the better • 1 shows a perfect relationship • Dummy Variables: nonnumerical variables • Sports: Conference vs Nonconference • Movie: Comedy vs Noncomedy • Music: Rock vs Nonrock • F-Test: F>3 is statistically significant

  4. Results • Theory – if supported a few times • Law – if always supported • Economists Toolbox – interpreting data • Verbal or written • Schedule • Graphical • Mathematical • Statements • Positive – “what is” • Normative – “what should be”

  5. Fallacies of Presentation • Load terminology to sway opinion • Criticizing the opposition • Special pleading – giving only one side • Appeal to “Authority” – make sure your endorser is an authority • Appeal to the people – “everybody else does” • Fallacy of Composition – what is good for one is good for all • Fallacy of False Cause – If b follows a, then a caused b

  6. Sports Regression Analysis: statistical technique to estimate a model • Attendance(ATT) = f(Prices (P)) • ATT = 2000 – 383P • (9.13) (13.3) • r^2 = .89 • F- stat = 12.3 • T – stat; t>2.00 • Adding Variables • Strong correlation between economic and athletic performance • Profits = f(attendance = g(winning), Prices) • ATT = f(Prices, Population, Income, Quality) • ATT = 112 – 5.6P + .05POP + 1.2(Income) + 14(WinPct)

More Related