sports league Econ and collective bargaining Flashcards
What is Rottenberg’s Invariance Proposition?
It states that the distribution of talent across teams remains the same regardless of how player rights are allocated, as long as trading is allowed and transaction costs are low.
How does Rottenberg’s Invariance Proposition apply if new players enter the league via a Draft?
Talent distribution should still be efficient because teams that value a player most will trade for them, even if the initial allocation was through a draft.
How does Rottenberg’s Invariance Proposition apply if new players enter as unrestricted free agents?
Players will directly sign with teams that value them most, achieving the same efficient talent distribution as if they entered via a draft.
What economic principle is the Invariance Proposition based on?
It is an application of Coase’s Theorem, which states that if property rights are well-defined and transaction costs are low, resources will be allocated efficiently regardless of initial ownership.
How do the number of competitors and prizes affect how engaging a sports contest is?
If there are too many competitors and only one prize, competition can become demotivating for lower-ranked participants. If all competitors receive prizes, competition loses intensity since there is less incentive to win.
What factors shape athlete incentives?
Prize structure, number of competitors, league policies, sponsorship & contracts.
What are other factors that could shape athlete incentives?
Media exposure, cultural/social status, team dynamics, personal motivations.
How have sports leagues cooperated, colluded, or limited competition?
Revenue sharing, salary caps, luxury taxes, draft systems, exclusive media rights deals.
What have sports leagues done that most businesses aren’t allowed to do?
Monopoly-like behavior, restricting labor movement, colluding on player wages, coordinating to limit competition.
What are ways in which sports leagues have cooperated, colluded, or limited competition?
Revenue sharing, salary caps, draft systems, luxury taxes, territorial rights.
Why have players agreed to Collective Bargaining Agreements (CBAs)?
Job security, revenue sharing, health & benefits, stability.
Why not have a completely free labor market where every player is a free agent?
Competitive balance, unstable salaries, lack of long-term contracts, league instability.
Why would players agree to a system with market imperfections?
Ensures fair pay distribution, job security, league sustainability, legal protections.
