Tuesday, April 17, 2007

Are Oldham matches Giffen goods?

A Giffen good satisfies the rather odd property that as its price increases, demand increases. It so happens that if you run a regression of Oldham's attendance on entrance price since 2000, the coefficient (given the particular regression model selected - I'm talking about the model I'm sticking in my thesis right now before I submit in 4 weeks) on entrance price (both logged) is 0.215, with a standard error of 0.096. So price goes up, attendance goes up!

The classic Giffen good is potatoes in Ireland during the famine. The classic explanation is that potatoes were a large part of the Irish diet, so that when their price increased, the Irish substituted away from other foodstuffs in order to ensure that they had enough potatoes to satisfy themselves, hence demand increased, perversely. There's an argument the same is true for football - it's a big part of a hard-up football fan's leisure diet, and so if the price goes up, other things must go out of the window (bit of shopping with the wife, the odd cinema trip), in order that he can get to as many matches as possible.

It's plausible, but I think more likely it's that football attendances in general are on the up, and Latics are caught up in this general trend. Football stadia are generally perceived to be safer these days, and football is more acceptable a thing to do, than say in the 1970s or 1980s. Also price is a very uninformative variable - it's constant for long stretches of the sample size, increasing in four increments from £14 to £20 over the sample. It strikes me it's more likely this is coincidental than causal. I sound very like my first ever econometrics tutor, John Ashworth in Durham, who argued strongly against the existence of the Giffen good...

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