What Is the Price Elasticity of Demand for the NFL Network?
Gregg Easterbrook of ESPN knows. It's greater than one (in absolute value):
And whether that will lead to an increase in the revenues for the firm depends on the price elasticity of demand. And it is not at all clear that the price elasticity of demand for NFL Network is greater than one.
The NFL's insistence on asking too much for its channel is yet another example of how often big business, with zillions of dollars in executive-suite and economic-consultant spending, nevertheless acts as if it's ignorant of basic economics. To increase revenues, cut prices; this raises demand. (A high price suppresses demand.)No, Gregg. If you cut prices, that will lead to an increase in the quantity demanded, not demand; if you cut prices, you move downward along the demand curve, you don't shift it.
And whether that will lead to an increase in the revenues for the firm depends on the price elasticity of demand. And it is not at all clear that the price elasticity of demand for NFL Network is greater than one.
Category: Economics, Sports Posted on
Wednesday, November 28, 2007 at 8:36pm
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After all, it is the quantity of people watching that drives ad revenues, and those revenues could be much greater than anything the cable comapnies are paying to carry NFLN if they get the number of viewers ESPN gets for its NFL broadcasts.