This website uses cookies to ensure you have the best experience. Learn more

Nhl Profit Maximization Case Study

1855 words - 8 pages

Do NHL teams profit maximize? Explain how the authors come to this conclusion.

Overview:

Before we dive into the details on whether the NHL team or any sports team for that matter maximize profit, it would be worthwhile to answer 2 basic questions as put forth by the author:

 Would a sports fan not go to a game which he is die-hard fan of because he/she thinks the team profit maximizes?
 Would a sports team forego additional revenue?

As with any commodity, price of an arena seat is set by supply and demand. This is why it always rings false when NHL execs try to link ticket prices to player salaries.

Any sports game ticket demand in North America is influenced by a number ...view middle of the document...

But in markets where demand was weak, ticket prices rose less because it’s tough to raise prices when fans aren’t lining up to see the games

What is Profit Maximization?

A process that companies undergo to determine the best output and price levels in order to maximize its return.

Profit Maximization Methods Used:
(1) Total Cost-Total Revenue Method.
(2) Marginal Cost-Marginal Revenue Method

Total Cost – Total Revenue Method
Profit is simply the Total Revenue minus the Costs incurred. Therefore by simply doing a multiplication and subtraction approach, the quantity and price of different permutations can yield the profit maximization levels.

We have to take into account Opportunity Costs as well when we account for profit maximization in an economics perspective else we would be obtaining the same only in an accounting perspective.
Marginal Cost-Marginal Revenue Method
An alternative perspective relies on the relationship that, for each unit sold, marginal profit (Mπ) equals marginal revenue (MR) minus marginal cost (MC).

Then, if marginal revenue is greater than marginal cost at some level of output, marginal profit is positive and thus a greater quantity should be produced, and if marginal revenue is less than marginal cost, marginal profit is negative and a lesser quantity should be produced.
At the output level at which Marginal Revenue equals Marginal Cost, Marginal Profit is zero and this quantity is the one that maximizes profit.
Since total profit increases when marginal profit is positive and total profit decreases when marginal profit is negative, it must reach a maximum where marginal profit is zero or where marginal cost equals marginal revenue and where lower or higher output levels give lower profit levels

Analysis of Profit Maximization per the Article
Profit Maximization in this article has been done using the Marginal Cost- Marginal Revenue method outlined above.

There are a few assumptions that are taken into account:
(i) Costs that vary with attendance are small so profit maximization coincides with revenue maximization
(ii) Games are sufficiently homogenous though in actuality depending on fan following or stadium etc it may differ. The factors affecting demand for ticket is outlined in Section above.
(iii) A single price depicts a team’s choice alternative though this does not hold in real circumstance where the pricing varies based on the seat allocation.

The author has begun his analysis with a (Inverse) Demand function.

What is an Inverse Demand Function?
In economics, an 'inverse demand function', P = f−1(Q),is a function that maps the quantity of output demanded to the market price (dependent variable) for that output. Quantity demanded, Q, is a function of price; the inverse demand function treats price as a function of quantity demanded, and is also called the price function.
Contrary to what we think, an inverse demand function is NOT the reciprocal of...

Other assignments on Nhl Profit Maximization Case Study

Finanical Management Essay

2683 words - 11 pages systematic risk of a security that cannot be avoided through diversification. a. Beta Part Two: 1. What do you understand by wealth maximization? Wealth maximization is a modern approach to financial management. The wealth maximization strategy generally involves making sound financial investment decisions which take into consideration any risk factors that would compromise or outweigh the anticipated benefits. Maximization of profit

Supply Demand In Gas Price Essay

3605 words - 15 pages stations with convenience stores in the US, with sales of 266,814 million (page 98, Reports: Worldwide Gas Stations with Convenience Stores). There was an increase of 1.4% in establishments, and 8.2% in sales compared to 2012 (page 98, Reports: Worldwide Gas Stations with Convenience Stores). Profit Maximization is when Marginal Revenue = Marginal Cost or is also known as the break-even point (page 406, R.G.Hubbard, & A.P. O’Brien). Loss

Mat540Quiz3

1175 words - 5 pages Question 4 2 out of 2 points Correct Graphical solutions to linear programming problems have an infinite number of possible objective function lines. Answer Selected Answer: True Correct Answer: True Question 5 2 out of 2 points Correct The following inequality represents a resource constraint for a maximization problem

Business The Back Bone Of Economy

1125 words - 5 pages is $40? These questions concern the supply behavior of perfectly competitive firms. We assume that our competitive firm maximizes profits, which are equal to total revenues minus total costs. Profit maximization requires that the firm manage its internal operations efficiently and make sound decisions in the market place. Why would a firm want to maximize profits? Profits are like the net earnings or take home pay of a corporation. They

Eco 365 Final Exam Assignment Uop Complete Course

2039 words - 9 pages firm’s product. To download the complete answer check ECO 365 Week 1 Knowledge Check 5). The best example of positive externality is: • Alcoholic beverages • Pollution • Education • Roller coaster rides 6). The theory that quantity supplied and price are positively related, other things constant, is referred to as the law of: • supply • profit maximization • opportunity cost • demand Click here and download ECO 365

Fin534 Week 10 Assignment 1

2335 words - 10 pages firm is analyzed with different tools. This process evaluates the firm efficiency in minimization of cost and maximization of profit (Bernstein & Wild, 2000). (Boscaljon et al., 2005) Stated that there are two further categories to evaluate operating performance and profitability. First, operating efficiency ratios, that includes assets turnover ratios. Second, operating profitability ratios, that includes profit margins return on equity. We have

Hkicpa

309 words - 2 pages Taxation Workshop Outline and Learning Methodologies Session Methodologies Chapters covered Workshop 1 1. Introduction • • Presentation Group discussion 2. Profits tax • Group exercise 3. Negotiation • • Role play Group exercise 4. Tax for individuals • • Case study Group discussion 5. Reboot • • Presentation Group discussion 6. Tax cases / Anti-avoidance • Group discussion

Egt1 - Task 1

3703 words - 15 pages Economics and Global Business Communications Name Course Instructor Date Competency 309.1.1: Marginal Analysis A.1. Profit maximization is the desire and target of all trading companies that operate in various industries, in different markets (Taylor & Weerapana, 2012). They must first of all produce products for sale to achieve the same. This production results into various financial

Student

6142 words - 25 pages is a much renowned food store, established at the different locations of California. The main focus of the store is to have ‘profit | |maximization’ by providing quality products at appropriate prices, in comparison of the competitors. The firm also wants to satisfy its clientele. | |Through this objective, the store wants to acquire major expansion. It currently wishes to enlarge its services by attaining perfection in the

Calvin

1458 words - 6 pages toy manufacturers it needs to acquire to reach its goal. A bounded rationality B satisficing standards C resource maximization barriers D synergistic issues 10 Darren Zhang of the University Career Center received word of a job opportunity from a marketing consulting firm, and he sent the e-mail on to all marketing majors. Darren is playing a(n) __________ role. A interpersonal B technical C informational D liaison Question 2 (20 marks) a

Customer Portfolio

3226 words - 13 pages profitability acrossing the entire customer base. The applied case study for this theory is an e-tailer company named CDNow – since 2001is owned by amazon.com which uses customer relationship management and building an electronic communication channel for customers. An optimal configuration of customer portfolio as well as possible management actions are determined to present in this study. It willfocus deeply on two customer segments which including

Similar Documents

Relationship Between Marginal Cost And Marginal Revenue

1095 words - 5 pages Relationship between Marginal Cost and Marginal Revenue Elisa Montoya Economics and Global Business Applications EGT1 October 23, 2013 Relationship between Marginal Cost and Marginal Revenue This essay will explain the relationship between “Marginal Cost” and “Marginal Revenue”, as well as the importance that these concepts for the maximization of profits. Profit Maximization Explanation

Usefulness Of Cost Volume Profit Analyisi As Amangerial Concept

2473 words - 10 pages which tend to maximization the profit Case to study : A school for special needs students its data as follows: Data for 2010 Fixed costs (buildings,gym,swimmingpool , 385414 furniture,land,buses) Variable costs(salary, utilities,food,therapy) Student tuition,fees Student variable cost Contribution margin 400000 14160 4392 (14160-4392)=9768 students 91 unit(2010) 125 unit (2011) 1770000 Revenues(91*14160) 1288560 14  DR.MOADE

Distinction Between Market And Market Structure And Its Implications For Managerial Decision Making

1002 words - 5 pages towards achievement of the traditional profit maximization objective of the firm. There are four kinds of market structures that can be identified: Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly. We would examine the market structures and their effects on managerial decision making in turn. Perfect Competition Perfect competition is the idealized version of the market structure with existence of many buyers and sellers

Concussions In Sports Essay

3182 words - 13 pages Occupational Safety and Health Case Study Draft Introduction Concussions have casted a dark shadow over sports throughout the last decade. They are the most common head and brain injuries suffered by athletes. A concussion is “a type of traumatic brain injury that is caused by a blow to the head or body, a fall, or another injury that jars or shakes the brain inside the skull” ("Concussion - WebMD: Causes, Symptoms, Diagnosis, Treatment, and