The f(utility) of football

The f(utility) of football

Arsenal is currently top of one league table. A UEFA report at the start of the year suggested that Arsenal fans pay more for watching football than any other club in the world. At an average £74.09 per fan, per match, one would hope that there is a high total utility gained from supporting the club over a season. This is more than that paid by fans of Chelsea (£68.71), Real Madrid (£55.91), Liverpool (£55.68), Man Utd (£53.41), Man City (£40.83) and Arsenal’s fierce rivals Spurs (£33.11!).

However, Arsenal’s recent record against the other so called ‘big clubs’ has meant that fans are leaving the ground suffering from football depression. Losing 5-1 at home to Bayern Munich, 3-0 to Man City and 3-1 to Man Utd is a chastening experience, particularly when Arsenal is behind the other Big Six clubs in the Premier League table. Utility theory would suggest that consumers wish to maximise their utility or personal satisfaction. This will lead to the maximisation of private benefit from consumption. The unit of measurement for utility is called utils. Outgoing Arsenal manager Arsene Wenger holds a Master’s degree in Economics from Strasbourg University. He might suggest that football purists that have followed Arsenal have gained a great deal of total utility through watching his side’s aesthetically pleasing style of football over the years. Indeed, up to the start of the 2017/18 season Arsenal had scored 1698 goals in the Premier League, beaten only by Man Utd (1856).

But, football is a funny old game! As consumption increases, marginal utility diminishes. This is reflected in the rows of empty seats that have been seen at Arsenal’s Emirates Stadium in recent matches. From a profit maximisation point of view this hasn’t affected Arsenal’s ticket sales. If increased consumption of a good or service provides fewer and fewer amounts of marginal utility, then at some point, consumers will only buy additional units if its price falls, However, Arsenal is able to use price discrimination by charging different prices to different consumers for different types of ticket. This might be due to the age of the consumer e.g. child v adult seats or it might be due to the quality of the seat e.g. distance from the pitch. Here, Arsenal sells tickets in blocks i.e. the season ticket. Therefore, you have already paid for the ticket. If the marginal utility were to fall at some point e.g. the traditional Arsenal collapse in February/March, the ticket has already been sold.

The use of football allows one to look at a range of economics theory. Football clubs use their monopoly power to charge high prices. Arsenal’s prices are impacted by income elasticity of demand. As London incomes have increased over the years, the demand for tickets has increased. The waiting list for an Arsenal season ticket is estimated to be over 100 000. The big football teams have a price inelastic product. To a large extent the top clubs have a captive audience – one doesn’t change their club.

So is the behaviour of Arsenal fans, or those of all clubs, surprising. A report out last week (–-or-it-more-important) suggested that the happiness of football fans increases by 3.9% (or 9.8% for those attending) when their club wins. However, it falls by 7.8% (or 14% for those attending) when the club loses. Behavioural economics can tell us a lot about people and their rationality. When the pain outweighs the pleasure and marginal utility falls, we still come back for more despite past experiences. There is an eternal optimism that greets a new season, when all teams are level and we all have high hopes. As the memory of a bad season diminishes the hopes for a new one grow. Our perception of the utils we gain from consuming a good or service is dynamic. The football clubs are masters at understanding this, extracting as much consumer surplus as possible from the average fan. After the poor year they have had there is no way an Arsenal fan is going to buy a new season ticket. But of course, after a new Emirates shirt deal worth £200m until 2024, £25m profit in November 2017 and £137.6m cash reserves, allowing the club to attract a world class new manager with the funds for new expensive signings, we all know that next season will be different! Where do I sign for my season ticket?