The Dollar Value of Purple Pride: The Existence Value of the ...

The Dollar Value of Purple Pride: The Existence Value of the ...

The Willingness to Pay for a New Vikings Stadium under Threat of Relocation/Sale Aju J. Fenn (The Colorado College) And John R. Crooker (Central Missouri State U) Acknowledgements: Dr. Allen Sanderson & Dr. John Whitehead Overview Introduction Existing Studies The Purpose of this Paper Data Collection and Sample Stats. The Empirical Model Results What lies Ahead?

2 Sale/ Relocation of the Vikings In a written statement, Vikings owner Red McCombs expresses his frustration that the Legislature this year didn't do more to help the football team realize its stadium dreams. In his statement, McCombs says he's engaged JP Morgan Securities to explore sale or relocation options for the team. Minnesota Public Radio May 21, 2002 3 Introduction Why study the willingness to pay (WTP) for a new stadium ? Public funds are used to build new stadiums Traditional reasons such as economic development (Sanderson, 2000), (Baade & Dye 1990), and fans consumer surplus alone (Alexander et al. 2000) do not justify public subsidies for a new stadium 4

Introduction Why study the willingness to pay (WTP) for a new stadium ? Public good aspects & a credible threat of team relocation There are public good aspects to sports teams (Johnson et al, 2001), (Johnson & Whitehead, 2000). The Vikings should be valued as a public good. There is a credible threat of relocation. 5 Existing Studies Johnson et al, 2001: They used a CVM approach to determine WTP for a new hockey arena for the Pittsburgh Penguins. Johnson & Whitehead, 2000: They use a CVM approach to determine WTP for a new stadium for the KY Wildcats and a potential Minor league baseball team. Johnson, Mondello & Whitehead: Examine the impact of temporal imbedding on WTP. 6 The Purpose of this Paper To examine the WTP for a stadium in the context

of a credible threat of team relocation. To examine the WTP for a stadium for a professional football team. To improve upon the existing methodology by: Conducting the study in the off-season. Using a larger sample size (1400 Vs. 900) Apply travel cost models from environmental economics to proxy the value of time and money spent watching games 7 Survey Methodology A random sample of 1400 households was purchased from a professional sampling firm.(Half of these were in the 7 county metro area) A random sub-sample of 200 households were mailed out at first to test the survey for readability and logistic issues. Then the other 1200 surveys were mailed out. Respondents received reminder postcards and follow up surveys. (Dillman, 1978) 8 Response Rate A total of 565 usable surveys have been returned.

46 surveys could not be delivered The overall response rate is 42% (Johnson et al. report a rate of 35.6%) 9 Data Collection and Sample Statistics. The first section deals with games viewed, fan interest questions, money spent on team merchandize and travel time to the stadium. The second section outlines a payment scenario and solicits payment amounts using a yes no format in response to a specific amount. The last piece of the survey solicits ticket pricing, parking and demographic information. 10 Sample Statistics The mean number of games attended was 0.33 The median number of games watched on T.V. was 10 41% read about the Vikings daily or weekly. 54% discussed the team daily or weekly with friends and family. 18% describe themselves as die-hard fans who

live and die with the team. 45% were WTP the amount on their survey. 11 Empirical Model WTP = f(AMOUNT, INCOME, PUBGOOD, SPEND, PRESTGE, WINSUPER, LEAVE, TWINS, UOFM,Z) AMOUNT = $5or $15 or $25 or $100 12 INCOME 1. 2. 3. 4. 5. 6. To the best of your memory what was your income before taxes last year? Less than $15,000 Between $15,000 - $29,999

Between $30,000 - $44,999 Between $45,000 - $59,999 Between $60,000 - $74,999 $75,000 or more 13 PUBGOOD In keeping with Johnson et al the index PUBGOOD is the sum of four dummy variables: READ, DISCUSS, INTEREST and FUN. READ is equal to zero if the survey respondent answered never or rarely when asked about how often they read about the Vikings in newspapers, magazines or online. DISCUSS was coded as zero if the respondent claimed that never or rarely discussed the teams fortunes with friends, family or co-workers. 14 PUBGOOD INTEREST was coded as one if the respondent claimed to Live and die with the Vikings. FUN measures the change in the quality of life of the respondent if the Vikings were to leave town. If the respondent answered fall slightly or fall a

great deal this variable was coded as one. It was coded as zero otherwise. 15 SPEND SPEND = EXPLICIT COSTS + IMPLICIT COSTS EXPLICIT COSTS = $ SPENT ON TICKETS + $ SPENT ON MERCHANDIZE IMPLICIT COSTS = IMPLICIT STADIUM GAME COSTS + IMPLICIT T.V. GAME COSTS 16 IMPLICIT COSTS 1 ICSG Hourly Wage Pr oxy * Travel Time (Game Length) * Games Attended 3 ICTV 1 Hourly Wage Pr oxy Game Length * (Games Watched on TV ) 3

17 PRESTGE 1. 2. Do you think that a new stadium would bring greater prestige to the Twin Cities area? Yes No. 18 WINSUPER Do you think that a new stadium would help the Vikings win the superbowl? 1.Yes 2. No. 19 LEAVE

Do you believe that the Vikings will leave town if they do not get a new stadium approved within the next few years? 1. 2. Yes. No. 20 TWINS TWINS = 1 if respondent indicated that they would not pay for a Vikings stadium because they would rather pay for a new Twins stadium. 0 otherwise 21 UOFM

UOFM = 1 if respondent indicated that they would be more likely to support the Vikings stadium drive if they sought a joint stadium with the U of M football program 0 Otherwise 22 Z Demographic Variables NONWHT COLGRD INCOME SINGLE MALE KIDS TIMINST URBAN 1 if race is Non-white 1 if College or Grad School education Annual Income 1 if Single

1 if Male Number of kids 1 if respondent has been in the state for over twenty years 1 if respondent is from seven-county metropolitan area 23 Summary Stats. Variable AMOUNT READ INTEREST DISCUSS FUN PUBGOOD SPEND PRESTGE WINSUPER LEAVE TWINS UOFM NONWHT COLGRD INCOME SINGLE MALE

KIDS TIMINST URBAN N = 565 Definition MEAN Bid Amount$5, $10, $25 or $100 37.26 1 if A few days per week or Daily 0.41 1 if I am a die-hard fan 0.18 1 if A few days per week or Daily 0.54 1 if Fall slightly or Fall a great deal 0.35 Public Good (Sum of Read, Interest, Discuss, Fun) 1.48 Money spent on tickets, merchandize and travel costs 323.80 1 if A new stadium will bring more prestige to the area 0.44 1 if A new stadium will help the Vikings win a Superbowl 0.11 1 if The Vikings will leave if they do not get a new stadium

0.55 1 if Support the Twins over the Vikings for a new stadium 0.06 1 if Support joint stadium with University of MN football 0.47 1 if race is Non-white 0.07 1 if College or Grad School education 0.51 Annual Income 56766.24 1 if Single 0.19 1 if Male 0.73 Number of kids 2.01 1 if respondent has been in the state for over twenty years 0.82 1 if respondent is from seven-county metropolitan area 0.50 Standard Deviation MAXIMUM MINIMUM 36.71 100

5 0.49 1 0 0.39 1 0 0.50 1 0 0.48 1 0 1.47 4 0 325.57 1879.14 0 0.50 1 0 0.31 1 0 0.50

1 0 0.23 1 0 0.50 1 0 0.26 1 0 0.50 1 0 27781.22 100000 7500 0.39 1 0 0.45 1 0 1.72 9 0

0.38 1 0 0.50 1 0 24 Regression Results Variable CONSTANT AMOUNT PUBGOOD SPEND PRESTGE WINSUPER LEAVE TWINS UOFM NONWHT COLGRD INCOME SINGLE MALE KIDS

TIMINST URBAN Log-likelihood Function Coefficient t-stat -1.54 -0.01 0.29 0 0.62 0.56 0.38 0.25 0.85 0.02 0.19 0 0 0.1 -0.03 -0.03 0.03 -229.23 -4.8 -3.82

4.47 2.06 4.39 2.06 2.69 0.93 6.13 0.07 1.31 -0.55 0.01 0.62 -0.7 -0.13 0.23 Marginal Effects -211.11 NA 39.85 0.09 85.69 76.23 52.27 34.84 117.32

2.86 25.94 0 0.17 13.9 -4.02 -3.51 4.3 25 Variable CONSTANT AMOUNT PUBGOOD SPEND GAMES PRESTGE WINSUPER LEAVE TWINS UOFM NONWHT COLGRD INCOME SINGLE

MALE KIDS TIMINST URBAN Log-likelihood Function MODEL1 MODEL2 MODEL3 -1.54 (-4.8) -0.01 (-3.82) 0.29 (4.47) 0 (2.06) _ -1.55146 (-4.9) -0.00728 (-3.8) 0.289945 (4.46)

0.000655 (2.06) _ 0.62 (4.39) 0.56 (2.06) 0.38 (2.69) 0.25 (0.93) 0.85 (6.13) 0.02 (0.07) 0.19 (1.31) 0 (-0.55) 0 (0.01) 0.1 (0.62) -0.03 (-0.7)

-0.03 (-0.13) 0.03 (0.23) -229.23 0.624588 (4.39) 0.552912 (2.05) 0.38508 (2.72) 0.254433 (0.92) 0.857795 (6.14) -0.00401 (-0.0) 0.193554 (1.31) -1.7E-06 (-0.5) -0.00299 (-0.0) 0.106783 (0.64)

-0.02915 (-0.6) -0.02404 (-0.1) 0.032204 (0.23) -229.225 -1.72193 (-5.4) -0.00737 (-3.8) 0.284453 (4.11) _ 0.028394 (1.89) 0.652453 (4.57) 0.574229 (2.12) 0.370588 (2.61) 0.273571 (0.98) 0.812788

(5.80) 0.062398 (0.19) 0.213567 (1.45) 1.62E-06 (0.61) 0.015113 (0.07) 0.086341 (0.51) -0.02684 (-0.6) -0.06338 (-0.3) 0.03184 (0.22) -229.616 26 STADIUM SAMPLE REGRESSION RESULTS Variable Regression Coefficient

t-stat Marginal Impact on WTP CONSTANT AMOUNT GAMES INCOME PUBGOOD NONWHT PRESTGE SPEND COLGRD -0.398635 -0.003592 0.099864 -9.55E-06 0.384625 -0.672187 0.974799 -0.002334 -0.401847 -0.571526

-3.571777 2.423514 -1.573298 2.950841 -1.387339 3.484399 -0.710849 -1.57488 ($110.98) N/A $27.80 $0.00 $107.08 ($187.13) $271.38 ($0.65) ($111.87) 27

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