Are you planning on watching the Mayweather Pacquiao fight tomorrow? I hope you are prepared to shell out some serious cash. My recommended strategy is to try to free ride off of someone else’s purchase, but we know how this usually turns out. This fight is already setting records for pay-per-view costs ($100) and the fighters are going to be paid pretty well for the evening: $120 million and $80 million respectively. Both of these fighters are said to be past their prime (I have no authority to judge this for myself) but Floyd is 38 and Manny is 36, which are ages generally indicating a nearing end in athletic careers. This fight, nonetheless, will give each of these fighters their highest payout of any other fight in their careers. There are obviously many reasons for this, but a major one is how both of these fighters have managed themselves and their business practices. These are the two most well-known, and successful fighters in the sport, and have been for some time.
Why then, did these two fighters not want to meet earlier in their careers, where the actual product would have been a quality than the one we will see on Saturday? This seems to be a very common discussion, pointing fingers at each side for not wanting to face the other etc. There is no way we will ever know what the real reasons were for them never fighting, but if we look at it from an economic perspective. This situation has parallels to monopolistic, or duopolistic profit maximizing strategies. The boxing industry has had two major producers of high quality products: Mayweather and Pacquiao. At least to the more casual fan, these have been two most important fighters, and whenever they entered the ring, their fights were the most coveted events. Based on their popularity, these fighters were essentially operating as a duopoly in the boxing industry.
Although you might suggest that there were other boxers offering a similar product, these other boxers did not have the wide draw of Floyd and Manny. When speaking of widely popular boxing matches, only these two fighters had a monopoly on the market. Both of these individuals, in fact, have behaved with some monopolistic tendencies. Take Mayweather for example. He has put off this fight for years, even with the high demand for this particular product. By doing this, he made this fight more and more scarce in the market. The profit maximizing strategy taken by monopolies and duopolies who control a scarce resource is to produce at a lower quantity than the quantity demanded by the market. This is essentially the exact strategy taken by Mayweather and Pacquiao when deciding when to fight. These fighters have been in control of the quantity of these fights to produce, and have finally decided to produce this highly demanded product. By waiting this long, the demand for this fight has reached probably its highest point. Any further waiting might have led the fight to become less attractive because of the increasing age of these fighters.
Boxers have the unique ability to have some control over their schedule, and therefore can produce any quantity of their fights. For boxers like Mayweather and Pacquiao, with such large market control, they can choose to limit the number of their fights, and make more from fights they do partake in. This is also interesting in the context of the sport, where the more fights boxers have, the faster their career will end. By taking on the properties of a monopoly, popular fighters can extend their career, and make more off of each fight than if they simply produced at the market demanded quantity. It appears as though Mayweather and Pacquiao have used this strategy effectively, allowing them to make the most money off of a single event that has ever been made by a boxer before.