Mesa City and the Curse of the Billy Goat

January 26, 2010

The Chicago Cubs have placed Mesa City, AZ, in a bidding war with Naples, FL., for the better deal. Mesa City is offering to build a new sport complex financed through bonds in order to retain the Cubs. This sort of bidding war becomes a race to the bottom as jurisdictions bid down the value of the franchise until there is nothing left. An optimistic economist would say this competition will continue until the economic rate of return reaches zero. A pessimistic economist will bring up the winner’s curse and say that the winning jurisdiction will likely over values the franchise. When the winning jurisdiction over values the franchise, it will likely offer to pay more than the actual value to acquire it. So, if Naples wins and Cubs move there, the real winner might just be Mesa City.

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