Some Conceptual Foundations: A Primer on the Economic Structure of Professional Sport

Abstract

The notion of competition is fundamentally at the core of a capitalist society. When firms actively compete against each other in a market, several social benefits are generated. In general, competition tends to lower costs, reduces production inefficiency, and leads to a more efficient allocation of societal resources. In other words, resources flow to their most productive uses. Competition is a dynamic process in that it is inherently forward looking, leading to innovation and creativity amongst producers. These benefits ultimately flow through to consumers, who enjoy a more wide range of product choices, higher-quality products, and lower prices. In general, the lower the degree of competition in a given market, the less present are these array of benefits—all else equal, less competitive markets can result in greater production inefficiencies, reduced innovation, fewer product choices, and higher prices for consumers, with the latter directly resulting in higher profits for producers.