University of Missouri Research Board

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University of Missouri
Michael Davis

Fill up the tank; we’re going to a baseball game!

Michael Davis, Associate Professor, Economics, Missouri S&T

By Jacqueline Lampert

The UMRB grant has been absolutely essential for my gasoline research. Much data is not freely available, and without this funding I couldn’t have afforded it.

Summertime means a car stocked with watermelon and lemonade, a seventh-inning stretch, “Take Me Out to the Ballgame,” and the crackle of fireworks after a home run. As an associate professor of Economics at the Missouri University of Science and Technology, Michael Davis takes a unique approach to participating in America’s favorite pastimes of baseball and road-trips. The golden age of crowded ballparks and cross-country traveling by car may seem like a thing of the past as Americans take a closer look at their budgets and reconsider spending that extra dollar. “Obviously, the recession hit,” he says, and as a result “everyone’s income went down.”

Much of Davis’ research in the field of economics focuses on attendance trends at sporting events. Currently, he is looking at possible correlations between the number of games baseball teams win and the amount of money they generate through ticket sales. If a team starts doing better, he first hypothesized, more people will start coming to the game. From this initial proposal Davis decided to take his research one step further, trying to elucidate some confounding variables that apparently affect that simple idea. “Is it possible,” he asks, “that if people start coming to the game, the team will have more revenue to spend and therefore they will start doing better?” While a definite answer to this question is still pending, Davis’ research suggests that success is a major driving force in attendance turnout for most teams.

In addition to America’s favorite pastime, Davis has studied the equally relevant topic of the price of gasoline. These two topics—baseball and fossil fuels—illustrate his commitment to investigating things the average person cares about. “Gasoline prices are important to everyone,” he notes, and pricing and consumption play a powerful role in the formation of public policy. It is important to research the pricing process because it plays such an integral role in everyday life in the United States.

In 2000, the Environmental Protection Agency enacted Phase II of the Reformulated Gas Program (RFG), imposing stricter environmental standards during the summer months. To reduce the amount of harmful emissions that cause ground-level ozone, RFG regulations require that gasoline-dispensing machines meet specific emission standards to ensure cleaner burning. Davis is analyzing the effects of these changes and is finding a pronounced seasonal pattern in gas prices.

According to his findings, since RFG was enacted drivers have paid an average of ten to twenty cents more per gallon during the summer as compared to the winter, whereas before RFG they saw only a slight difference in prices between seasons. The reason for this discrepancy, he explains, is that it costs money for RFG to be enforced by gasoline distributors, and that cost is passed on to people at the pump. In other words, Davis found that while “retailers are increasing the prices,” it may not be entirely their fault, since their own costs are also rising. Still, he has also discovered that some stations have increased their profit markup as well.

While Davis has clearly observed a trend of higher costs during the summer, he explains that there is no way to predict gasoline prices down to the nickel or dime. “Gasoline prices are difficult to forecast,” he explains, “because they are based on crude oil prices.” This unpredictable variable leads to uncertainty, but he does expect to see a characteristic seasonal variability.

Much of Davis' research was partially funded by the University of Missouri Research Board. For example, the UMRB grant made it possible to collect the appropriate data for his statistical analysis of gasoline prices. “It has absolutely been essential with this project,” he says, “because much of the data is not freely available, and without this funding I wouldn’t be able to afford it.” The UMRB grant also allowed Davis to expand his investigation, comparing government data on national crude oil and gasoline prices with specific daily figures obtained from local stations across the country. Funding from the Research Board is critical, he emphasizes, because it allows researchers to expand their work and carry out worthwhile projects that otherwise might not be feasible.

In addition to Davis’ research in economics, he teaches a variety of classes, including "Principles of Macroeconomics," "Money and Banking," "International Finance," and "Sports Economics." Student involvement lies at the very foundation of his work, and he uses his research to good advantage in the classroom. What's more, students also have the opportunity to conduct their own research. For example, one of Davis’ students is investigating "white flag trade" - a situation in which a winning team suddenly decides to trade away its best, and perhaps most popular, players - to determine its possible effect on attendance at individual baseball games. Whether concerned with baseball or gasoline, Davis’ research features topics to which most of his students can readily relate.