In the 1990s, many economists disdained sports economics as a field for specialization. But, as someone who had played and watched sports his whole life, Rodney Paul went against that advice he heard in graduate school.
Paul had an extensive sports CV: playing basketball and baseball in high school, basketball and tennis in college; playing street hockey growing up, starting a club hockey team in graduate school; coaching basketball.
While finishing his dissertation – a time-series analysis of savings rates across countries – and working as an adjunct professor, he followed an instinct and began studying on the effects of fighting on attendance at professional hockey games. The American Journal of Economics and Sociology published that paper in 2003.
Today, sports topics dominate the publications listed in the CV of Paul, a professor in the Department of Sport Management, including:
- TV ratings for Monday Night Football
- Forecasting fan interest in National Football League games
- Effects of fireworks promotions on minor league baseball attendance
- Wagering preferences of NFL bettors
- American Hockey League attendance
- Impact of atmospheric conditions on baseball’s total market.
Sports have “been a lifelong passion,” says Paul, who joined the Falk College faculty in 2011. “I just was lucky enough to be able to apply that to my Ph.D. in economics in a unique way.” A mathematics and economics double major at Lebanon Valley College in Pennsylvania, Paul received his Ph.D. in applied economics from Clemson University in 2000.
That paper on hockey attendance, “Variations in NHL Attendance: The Effect of Violence, Scoring, and Regional Rivalries,” found that violence, especially fighting, attracted fans in large numbers across the United States and Canada, as did a recent change to more games against regional rivals. And it was that publication that piqued his interest in specializing in sports. He began to research the economics of sports gambling markets.
“I found what I perceived to be some considerable gaps in the current literature as to the understandings of the workings of the market and began to heavily pursue that angle,” says Paul. “The field kind of took off and became more generally accepted in the sphere of economics and finance as I was working on those topics.” By 2017, the North American sports market will total $67.7 billion, according to PwC’s Sports Outlook of November 2013.
His research focuses on two main areas. He uses sports betting market data to test the efficient markets theory, and he develops models for attendance and TV ratings. Simply put, Paul says, “The betting market provides a forecast of game outcome – the point spread, or odds – and scoring by both teams – the total of the over/under. These factors have been shown in my, and others, research to impact how many people watch a game on TV or attend a game.”
The sports book, Paul explains, does not price to balance the betting action – unlike the stock market, where the efficient markets hypothesis says prices reflect all available information. Bettors show clear preferences for the favored teams and the highest scoring totals.
“My main contributions have been to show consistent and predictable rejections of the efficient markets hypothesis in both the sides – betting on a team – and totals market – betting on the number of points scored by both teams,” he says.
For attendance and ratings models, he has studied the impact of promotions, interleague play, geographic rivalries, efforts to curb fighting, and Nielsen ratings across football and major and minor league baseball and hockey.
“This allows for the study of competitive balance and the uncertainty of outcome hypothesis to determine what drives the interest of fans watching sporting events,” Paul says. These models are key to the financial success of sports teams, since to sell tickets and get TV viewers teams need to understand what factors influence fans’ choices.
The betting market is extremely important to sports, he continues. In the event of a complete crackdown on betting – both legally in Nevada and illegally elsewhere through local bookies – he would predict a deep decline in interest in sports:
“Many people enjoy participating in the sport by wagering on who they think is going to win or on their favorite team, and they become invested in the team monetarily on a game-by-game basis.”
His classes focus on sport finance and research methodology. Modeling of attendance and TV ratings is important for both revenue and understanding how leagues and teams schedule games, he says. Students use the efficient markets hypothesis to understand the pricing of assets, he continues, “and many students can understand this in a context of point spreads easier than they can in terms of stock prices.”
Paul’s influence is felt on a new generation of sport managers. One of his students recently had the findings of an independent study project published. Jonathan Plaut ’13 studied Big East basketball attendance to test the uncertainty of outcome hypothesis. He concluded that Big East fans buy more tickets for close games with expected high scoring, supporting the hypothesis. Plaut and Paul were co-authors, with Andrew Weinbach of Coastal Carolina University, of “Information, Prediction Markets, and NCAA Basketball Attendance: The Big East Conference,” published in 2012 in the Journal of Business, Industry, and Economics.
Paul’s article on Monday Night Football TV ratings recently has been listed as a top-10 cited article in The Journal of Economics and Business. “The Uncertainty of Outcome and Scoring Effects on Nielsen Ratings for Monday Night Football,” co-authored with Weinbach – they shared an office at Clemson – was published in 2007. The paper found that the uncertainty of the outcome, quality of the teams, and expected high scoring had predicted high audiences.
The standard economist rankings done by the Federal Reserve Bank of St. Louis rank Paul among the top one-third in citations for economists. “Given that I have been in the field for a little over a decade, I’m happy with where I am at and really hope to crack the top 10 percent sometime soon,” he says. Forbes.com and CFO Magazine have cited his research. He’s been interviewed on National Public Radio about NFL labor issues and TV rights for the Olympics.
With a head for numbers and a heritage of sports, Paul is glad to say, “I hit the market at the right time and was able to ride the wave of interest in the topic.” His grandfather pitched in the Detroit Tigers organization. His parents and uncle nurtured his interest in sports, “through taking me to games, watching games, coming to my games.” And so he has blended a passion for playing sports with a passion for studying sports:
“As a friend of mine joked once, I went from being a macroeconomist that did sports (question mark) to a sports economist that did macroeconomics (exclamation point).”