South-Western College Publishing - Economics  
Racetrack Owners Have Fences to Jump Before The Home Straight
Subject Demand
Topic Supply and Demand
Key Words Racetracks, betting, gambling, lotteries, prizes
News Story

Apart from major horse races, such as the Kentucky Derby, the Preakness, and the Belmont Stakes, racetracks tend to be poorly attended. For example, Belmont Park attracted 27,500 racegoers on average in 1970, but nowadays attracts around 8,000. There are exceptions, however, like Saratoga Springs in upstate New York and Del Mar near San Diego, where summer tourists ensure large crowds.

What happened? Racing executives are partly to blame. They did not want to televise races because they wanted to make people attend the track to bet. But television helped other sports develop new legions of fans. Then betting was allowed off-track, and alternative forms of gambling, such as lotteries, casinos, and riverboats, flourished. Now people can bet over the phone and do not have to incur the hassle and expense of going to the track. Track owners tried to bring race-goers back through free admission, free hot dogs, concerts, and lucky draws, but with little effect.

Nevertheless, betting is on the rise. Race prizes are increasing in value. Some hope that this will result in more interest in going to the track. Some track owners are planning to capture the interest of the public by turning their racetracks into entertainment centers and shopping plazas, even installing slot machines and casino games.

(Updated July 1, 2000)

Questions
1. Over recent decades, there have been several developments affecting horseracing attendance. For each of the ones cited below, state which determinant of demand has been affected, and explain whether there has been a movement down the demand curve for race attendance or a leftward shift in it:
  a) the lack of televised races which restrained the number of racing fans.
  b) the legalization of off-track betting.
  c) the emergence of alternative forms of gambling.
  d) the cost of traveling to the track.
2. In the face of declining attendance, racetrack owners offered free admission.
  a) Draw a diagram of the demand curve for racetrack attendance. Show what happened to the number of attendees when the price of entry to the track was reduced to zero. Why do you think that this strategy had little effect?
  b) Free hotdogs and concerts were offered at some tracks. What kinds of goods are these in relation to racetrack attendance? What was the effect on the demand curve? Illustrate your answer on your diagram.
3. Now some plan to create entertainment centers and include shopping plazas.
  a) Which determinant of demand are the owners seeking to influence?
  b) In another diagram of the demand for racetrack attendance, show the potential effect of this plan.
Source Ray Kerrison, "A Day at the Races," The Wall Street Journal, May 19, 2000.

Return to the Supply and Demand Index

©1998-2001  South-Western College Publishing.  All Rights Reserved   webmaster  |   DISCLAIMER