ABSTRACT
This chapter explains the source of the teams' market power and shows how teams exercise it in their dealings with cities. It considers costs from the viewpoint of cities, shows that the cost of construction helps dictate where cities place stadiums, and evaluates the ways cities fund the construction of facilities that now typically cost billions of dollars. Teams began to exploit the monopoly power they exerted by encouraging bidding wars between cities hoping to attract a team and cities that were determined to keep "their" team. Stadium location decisions take place on a larger scale, when leagues cross national boundaries. In addition to creating deadweight loss, sales taxes often burden groups that the government does not wish to target, such as people who do not benefit from the new facility, thereby violating horizontal equity. The chapter explores the problem posed when the burden of a sales tax does not fall solely on the people who ostensibly pay the tax.
