The Super Bowl has become one of the most prominent annual
events in the United States in the past few years. What was once just a
championship game for a popular sport league has expanded into a extravagant
holiday rivaling some of the biggest holidays of the year in its excess. The
Super Bowl, despite being just a one day event, is able to drive up the
equilibrium points in several of its markets quite dramatically. The most
commonly known version of this is in advertisements. For a company to manage to
obtain commercial time during the super bowl costs companies millions upon
millions of dollars, for just thirty seconds. The Supply is incredibly limited,
but the Demand is dramatically increased during the super bowl, causing the
point of equilibrium to gain in price, but stay the same in quantity.
Advertisements aren’t the only place where demand increases
dramatically. Memorabilia for both teams in the Super Bowl will be very high in
the weeks leading up to the super bowl. Normally, the NFL will have its
producers churning out as much supply as possible to meet the very high demand,
but this year, the NFL is facing an issue. The NFL has had a contract with
Reebok to be the producer of replica jerseys, but the contract ends this year,
and Nike will take over production. This is causing Reebok to limit production,
because they don’t want to end up with excess supply that the NFL may not sell
because the contract is over. This is causing an issue, because Reebok won’t
produce jerseys for players they don’t have confidence they will be able to
sell off. The Biggest names are still being produced to meet demand, but some
other names that are currently in high demand are not being produced at a
supply to meet demand. This is causing a radical shift in the supply demand
framework, because supply is shifting inward because of the producer’s actions,
while demand is shifting outward because of the consumer’s currents tastes.
What makes this different though is there is no real change in price of the
product. The producer isn’t going to sell them for a higher price, because the
NFL wouldn’t allow them, because it makes them look bad. If the products are
being sold secondhand, the prices will probably be getting higher.
Source:
http://money.cnn.com/2012/01/26/news/companies/giants_patriots_nfl_jerseys/index.htm?iid=SF_BN_River
Because Nike will start to supply the same jerseys Reebok already has in stock, there will be an excess supply in "big-name" jersey's causing the price of these jerseys to drop
ReplyDeleteYou raise a really interesting point regarding supply and demand - something often overlooked. Sales do not happen instantaneously. Production occurs, then comes the shipping/distribution, then stocking, and eventually the sale. Middle-of-the-road players do not have much demand, but over time they will get sold. With the change-over in companies, Reebok does not want to be left with an inventory of unsold uniforms. The question I immediately think of is why do they not price differently for different players. If they have a surplus of one guy why not just charge a lower price? I notice this at NASCAR races. You can predict when a driver is going to get fired by whether the souvenir trailors discount their stuff. Big name drivers always command high prices, while discounts occur for guys who might lose their job.
ReplyDeleteWhile I agree with you Joe, many of the prices of these "big name" jerseys will drop regardless. THis is just the nature of the NFL, every year there are big names that emerge while others fade while others change teams rendering thousands of jerseys useless. A good example of this is rookies who become top selling jerseys before they play. In 2007 Jamarcus Russell was one of the top selling jerseys, if you were only willing to pay $10 to get his jersey then you had a very small chance of acquiring it. But by 2009 it was barely selling and a person only willing to pay $10 could easily acquire the jersey.
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