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

2

Overview

• Introduction

• Existing Studies

• The Purpose of this Paper

• Data Collection and Sample Stats.

• The Empirical Model

• Results

• What lies Ahead?

3

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

4

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

5

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.

6

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.

7

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

8

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)

9

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%)

10

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.

11

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.

12

Empirical Model

• WTP = f(AMOUNT, INCOME, PUBGOOD, SPEND, PRESTGE, WINSUPER, LEAVE, TWINS, UOFM,Z)

• AMOUNT = $5or $15 or $25 or $100

13

INCOME

• To the best of your memory what was your income before taxes last year?

1.      Less than $15,000

2.      Between $15,000 - $29,999

3.      Between $30,000 - $44,999

4.      Between $45,000 - $59,999

5.      Between $60,000 - $74,999

6.      $75,000 or more

14

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.

15

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.

16

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

17

IMPLICIT COSTS

AttendedGamesLengthGameTimeTraveloxyWageHourly *)(*Pr3

1 ICSG

)(*Pr3

1TVonWatchedGamesLengthGameoxyWageHourlyICTV

18

PRESTGE

• Do you think that a new stadium would bring greater prestige to the Twin Cities area?

 

1.      Yes

2.      No.

19

WINSUPER

• Do you think that a new stadium would help the Vikings win the superbowl?

 

1.Yes

2. No.

20

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.        Yes.

• 2.        No.

21

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

22

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

23

Z Demographic Variables

NONWHT 1 if race is Non-whiteCOLGRD 1 if College or Grad School educationINCOME Annual IncomeSINGLE 1 if SingleMALE 1 if MaleKIDS Number of kidsTIMINST 1 if respondent has been in the state for over twenty yearsURBAN 1 if respondent is from seven-county metropolitan area

24

Summary Stats.Variable Definition MEAN

Standard Deviation MAXIMUM MINIMUM

AMOUNT Bid Amount$5, $10, $25 or $100 37.26 36.71 100 5 READ 1 if “A few days per week” or “Daily” 0.41 0.49 1 0 INTEREST 1 if “I am a die-hard fan” 0.18 0.39 1 0 DISCUSS 1 if “A few days per week” or “Daily” 0.54 0.50 1 0 FUN 1 if “Fall slightly” or “Fall a great deal” 0.35 0.48 1 0 PUBGOOD Public Good (Sum of Read, Interest, Discuss, Fun) 1.48 1.47 4 0 SPEND Money spent on tickets, merchandize and travel costs 323.80 325.57 1879.14 0 PRESTGE 1 if “A new stadium will bring more prestige to the area” 0.44 0.50 1 0 WINSUPER 1 if “A new stadium will help the Vikings win a Superbowl” 0.11 0.31 1 0 LEAVE 1 if “The Vikings will leave if they do not get a new stadium” 0.55 0.50 1 0 TWINS 1 if “Support the Twins over the Vikings for a new stadium” 0.06 0.23 1 0 UOFM 1 if “Support joint stadium with University of MN football” 0.47 0.50 1 0 NONWHT 1 if race is Non-white 0.07 0.26 1 0 COLGRD 1 if College or Grad School education 0.51 0.50 1 0 INCOME Annual Income 56766.24 27781.22 100000 7500 SINGLE 1 if Single 0.19 0.39 1 0 MALE 1 if Male 0.73 0.45 1 0 KIDS Number of kids 2.01 1.72 9 0 TIMINST 1 if respondent has been in the state for over twenty years 0.82 0.38 1 0 URBAN 1 if respondent is from seven-county metropolitan area 0.50 0.50 1 0 N = 565

25

Regression ResultsVariable Coefficient t-stat Marginal Effects

CONSTANT -1.54 -4.8 -211.11AMOUNT -0.01 -3.82 NA

PUBGOOD 0.29 4.47 39.85SPEND 0 2.06 0.09

PRESTGE 0.62 4.39 85.69WINSUPER 0.56 2.06 76.23

LEAVE 0.38 2.69 52.27TWINS 0.25 0.93 34.84UOFM 0.85 6.13 117.32

NONWHT 0.02 0.07 2.86COLGRD 0.19 1.31 25.94INCOME 0 -0.55 0SINGLE 0 0.01 0.17MALE 0.1 0.62 13.9KIDS -0.03 -0.7 -4.02

TIMINST -0.03 -0.13 -3.51URBAN 0.03 0.23 4.3

Log-likelihood Function -229.23

26

Variable MODEL1 MODEL2 MODEL3

CONSTANT -1.54 -1.55146 -1.72193(-4.8) (-4.9) (-5.4)

AMOUNT -0.01 -0.00728 -0.00737(-3.82) (-3.8) (-3.8)

PUBGOOD 0.29 0.289945 0.284453(4.47) (4.46) (4.11)

SPEND 0 0.000655 _(2.06) (2.06)

GAMES _ _ 0.028394(1.89)

PRESTGE 0.62 0.624588 0.652453(4.39) (4.39) (4.57)

WINSUPER 0.56 0.552912 0.574229(2.06) (2.05) (2.12)

LEAVE 0.38 0.38508 0.370588(2.69) (2.72) (2.61)

TWINS 0.25 0.254433 0.273571(0.93) (0.92) (0.98)

UOFM 0.85 0.857795 0.812788(6.13) (6.14) (5.80)

NONWHT 0.02 -0.00401 0.062398(0.07) (-0.0) (0.19)

COLGRD 0.19 0.193554 0.213567(1.31) (1.31) (1.45)

INCOME 0 -1.7E-06 1.62E-06(-0.55) (-0.5) (0.61)

SINGLE 0 -0.00299 0.015113(0.01) (-0.0) (0.07)

MALE 0.1 0.106783 0.086341(0.62) (0.64) (0.51)

KIDS -0.03 -0.02915 -0.02684(-0.7) (-0.6) (-0.6)

TIMINST -0.03 -0.02404 -0.06338(-0.13) (-0.1) (-0.3)

URBAN 0.03 0.032204 0.03184(0.23) (0.23) (0.22)

Log-likelihood Function -229.23 -229.225 -229.616

27

STADIUM SAMPLE REGRESSION RESULTS

Variable Regression Coefficient t-stat Marginal Impact on WTP

CONSTANT -0.398635 -0.571526 ($110.98)AMOUNT -0.003592 -3.571777 N/AGAMES 0.099864 2.423514 $27.80INCOME -9.55E-06 -1.573298 $0.00

PUBGOOD 0.384625 2.950841 $107.08NONWHT -0.672187 -1.387339 ($187.13)PRESTGE 0.974799 3.484399 $271.38

SPEND -0.002334 -0.710849 ($0.65)COLGRD -0.401847 -1.57488 ($111.87)