Is the NHL more of a bilateral monopoly or a monopsony?

Discussion in 'Fugu's Business of Hockey Forum' started by Grandpabuzz, Jun 24, 2005.

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  1. Grandpabuzz

    Grandpabuzz Registered User

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    I am doing a report for school concerning this subject and was wondering if the NHL can be considered more of a monopsony or bilateral monopoly and what evidence supports that. Plus it is something different from all the lockout questions as well.
     
  2. Chili

    Chili Registered User

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    Since last Sept 15th, I'd say it's been a "do not pass go, do not collect ~$2.3 billion" outfit.

    Seriously, good question for an economist.
     
  3. Montrealer

    Montrealer What, me worry?

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    Well...... I don't think it's a monopsony because
    -Monopsonies usually depress wages because they limit employment
    -NHL players can "sell" their services to many leagues, not just the NHL, so the NHL is not in the strictest sense a single buyer. Besides, the thirty teams do not act uniformally when offering contracts.

    Bilateral monopoly? I'd say more of an oligopoly, where there are few sellers of prime first-level hockey (the NHL's thirty teams) who also collude to fix prices (salaries) and and act in non-competitive terms when compared to a laissez-faire situation.


    By the way, IANAE*.







    *I am not an economist.
     
  4. Grandpabuzz

    Grandpabuzz Registered User

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    I can see your point actually with reference to an oligopoly as the NHL does engage in the game-theory aspect where each team or buyer is responsible for buying the players in respect to the other team's offer making sure it is not to high or too low. How would it relate to the Hefindal?? Index I don't know. What also makes this difficult is the presence of a lockout which usually occurs only for monopsonies or bilateral monopolies.
     
  5. cws

    cws ...in the drink

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    Some economics professors may disagree with me on this (no surprise as economists have a habit of disagreeing with each other), but to me it looks as though the NHL falls into the category of both an oligopoly and a bilateral monopoly. Montrealer's point is a good one that could also change the view of this, that there are many other hockey markets outside of North America and the NHL. Going at this on that level, more of a macro one, the analysis of the behavior will be a fair bit different. But probably best just to stick with the NHL as the basis.

    The bilateral monopoly idea does hold up. You can lump the NHL and the PA into single entities, a single buyer and a single seller. One obviously wants lower prices, and one higher prices. Their ability to acheive those goals is based on their negotiating power.

    But if you narrow the scope a bit and focus on the NHL (and as such the owners), then you have more of an oligopoly. Maybe not one in the truest sense of the definition, but pretty damn close. Fairly low number of businesses, somewhat small percentage of those have a great influence on price, very tough for someone else to enter the market (ie, a new franchise). Non-price competition can also be seen throughout the league.

    Another characteristic of an oligopoly that is seen in the NHL has been the topic of many threads and discussions, though not really brought up as such. That would be interdependence. Owners closely watch what decisions the other owners make; in many areas, but it's noticed mostly in the price and benefits of contracts. In this type of market, it is essential that you pay attention to what your competitors do or you will quickly get left behind. In some cases, an owner might choose to not follow his competitors in an effort to try and save what he has (the miser types, you know who those are ;)). In other cases, some owners simply can't follow the others because they don't have the resources. Either way, you will fall off the pace. There's simply not a way around that in this market (aside from illegal activities). That's why I have never bought into the argument that if most GMs and owners stuck to a budget, then the league wouldn't be in as much trouble as it is now. The way this market acts and reacts, that notion doesn't work in the least little way.

    The NHL is a strange animal, to say the least. It's not a conventional market type, tough to separate the parts. I know there are those that would disagree with me, but I believe this to be it's basic set-up. Hope it helps.
     
  6. Grandpabuzz

    Grandpabuzz Registered User

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    Yes it helped a lot thank you. So I know monopsony is out of the question, so I am going to argue that its more of a oligopoly when looking at a certain position rather a bilateral monoply. I can see the issue with a lockout and with the single buyer (NHL) and single seller (NHLPA) but I think oligopoly can be expanded more with the game-theory and non price competition along with how hard it is to enter and such.
     
  7. Epsilon

    Epsilon #basta

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    One thing to keep in mind is that the "many other markets" existing does not necessarily prevent an entity from being viewed as a monopoly in the legal sense of the word. Microsoft for instance is considered to legally hold a monopoly in the operating systems market, despite there existing many smaller alternatives.
     
  8. cws

    cws ...in the drink

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    I agree. Even at a very macro level, monopolies can and do exist in some industries. You have to be an absolute monster (like MS), but you're right that sometimes it doesn't matter how broad you view it, a company in a certain industry is always going to be a monopoly.

    Changing the perspective often times changes whether a business is considered a monopoly or not (applies to most other market types as well). For example, let's say a smallish town has 5 or 6 resturants and there is no other town in a 50 mile radius. Those resturants have a localized oligopoly. Or the same town has only one place you can rent movies, a localized monopoly. The resturants keep close tabs on each other, trying to do whatever they can to get more customers. The video store has no competiton and can up charges if it chooses. Of course the pricing in both those examples would depend on if the businesses were franchises and what the policies are for that particular franchisor (that can change the example a bit, but you stil get the point).

    But take those examples and put them in a much broader scope, let's say resturants/video stores throughout a state (or province as the case may be). Now it's trending towards a more open market type of analysis for those businesses, much different than before. I guess it's all a matter of what level you're trying to assess behavior and distinguish patterns on.

    It's easy to see why the world doesn't like economists too much. Boring, and you never get a straight answer ;)
    Believe me, I'm doing my best to get away it.
     
  9. GSC2k2*

    GSC2k2* Guest

    I am not sure the NHL qualifies for any of those appelations. I tihnk the NHL is more of a consortium acting jointly in and of itself rather than a 30 entity industry.
     
  10. cws

    cws ...in the drink

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    In certain respects, under certain conditions, viewing the league (and/or its owners) from a specific perspective; it can be qualified under these conditions. But by no means would it be the end of the debate on this question, from an economist's standpoint at least.

    What I tried to present (hopefully with a little merit) was basically from a static point of view. Real world examples are rarely if ever static. And more difficulty comes into play when the parameters of a certain analysis are not easily identifiable, as if definitely the case here. The industry and market structure here are an amalgam; not unique per se, but jumbled enough so that many varied interpretations of its behavior could be contrived.

    Just a surface analysis, I don't even pretend this is anything more (I'm sure as hell not that bright). I don't know near enough to even begin trying to break this down in detail. Even if I did, I have the distinct feeling that it would be very difficult to try and judge how this specific market would act/react to the coming changes.

    I think one of the lessons here is that the world hates an economist, and rightly so. We never give a straight answer, and there is little hope that we ever will. You'll just be subject to a series of boring analyses; something that could actually be pretty enlightening but usually ends up going in one ear and coming out the other. Such is our fate (hopefully one I will be leaving soon).
     
  11. dolfanar

    dolfanar Registered User

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    Whatever MacDonalds is, that's what the NHL is. A central entity which has franchised itself out to 30 regions.

    For customers there are many, many alternatives in entertainment (And that's really all hockey is in the end), from rival hockey leagues to rival sports leagues to movies, tv, the theater, etc...

    For *players* it's a bit trickier, but there are alternatives even there. Not great ones mind you, but a high paying legal firm isn't a monopoly because Joe Blow law firm pays 1/10 what they do...
     
  12. joechip

    joechip Registered User

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    The NHL is not a monopoly in any credible sense of the word. By Anti-Trust Law there is a problem with how the NHL used to do business, but that does not make the NHL a monopoly. In my personal opinion, it just proves how stupid Anti-Trust law is.

    Even among the most hard-core free market economists, the Austrian School, there is division on the definition of a monopoly. The concept of it is a given by both Keynesians and Monetarists, both of whom I think are dead wrong.

    See this article by Walter Block as a starting point:
    http://www.mises.org/journals/jls/1_4/1_4_1.pdf

    The NHL is a Corporation made up of franchises and it's product is the internal competition of each franchise for a unique trophy. That's it.

    Because of Anti-Trust law there is a monopsony-like relationship with the NHLPA for the buying of talent to perform the competitions sponsored by the NHL.

    There are plenty of substitutes for the NHL's product.... I have about 250 of them on my $42/month DirectTV subscription, not to mention World of Warcraft, the 500 or so books on my "To Be Read" list, or the multi-stack of PS2 games gathering dust next to my DVD collection.

    Furthermore, there's the AHL, who, if the players find it such a burden to play in the NHL can very easily choose to play there, or in the ECHL or any other european league.

    That the NHL is the premier employment opportunity for elite hockey players doesn't make it a monopoly, it makes it a fantastic competitor. To call the NHL a monopoly would be like calling the Louvre a monopoly, which is why Anti-Trust law is moronic, and, by the way the root cause of this lockout.

    Ta,
     
  13. GSC2k2*

    GSC2k2* Guest

    Any discussion based on the premise that economists are dead wrong is always a reasonable one, and has a definite probability of being correct in its own right. ;)
     
  14. misterjaggers

    misterjaggers Registered User

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    -page 158,
    The Economics of Professional Sports
    Duane W. Rockerbie
    http://people.uleth.ca/~rockerbie/SportsText.pdf

    I like this explanation.
     
  15. arnie

    arnie Registered User

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    Neither. It's a moronopoly.
     
  16. Leaf Army

    Leaf Army Registered User

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    This is the best one yet. The professional sports industry is unique and doesn't really apply to typical monopoly definitions.

    Although I remember Ron McLean refering to the NHL as a cartel in an interview with Bettman one time and Bettman looked as though his head was going to explode.
     
  17. dolfanar

    dolfanar Registered User

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    Sold!
     
  18. Motown Beatdown

    Motown Beatdown Need a slump buster

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    Best answer yet.
     
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