Wednesday, March 11, 2009
Another New York Monopoly on Professional Athletes?
While trying to think of a topic for my blog I took a short break and while doing so visited ESPN.com when I thought of the Cleveland Cavs, Lebron James, and the summer of 2010 when Lebron becomes a free agent. This means I started thinking of Lebron James wearing an ugly blue and orange New York Knicks jersey. Then I thought of the New York Yankees and the way they get every and any player they seem to want. The Knicks have already been preparing to have an exceptional amount of salary cap space in order to make an offer for not only Lebron, but also another NBA all-star. Thanks to some price discrimination, the Cavs have a very good chance at keeping Lebron in Cleveland. Price discrimination works in an odd way when speaking of Lebron and other free agents. Lebron would cost less to the New York Knicks, or any other team, than he will for the Cavs. Who would think that since they Cavs are allowed to spend MORE money, they would be better off? I wonder what the demand curve for Lebron James looks like. How much would a team be willing to pay without any price ceiling? Unlike major league baseball, the NBA has a successful salary cap and many other restrictions on salaries. Hopefully all of this results in Lebron staying in Cleveland and stops another professional New York sports team from becoming an all-star team!
In contrast to the NBA and other other leagues, soccer leagues in European nations generally do not have a salary cap. I believe this is much better for the economy. The supply and demand curve is not affected by price barriers. The goods (players) go to whoever has the most value for them. However in a way this can also be bad. If a team has an seemingly endless amount of money (Real Madrid) they can purchase everyone they want, creating a monopoly on talented players. This monopoly is related to a monopoly in economics. The controller of a monopoly produces less goods and creates a shortage. In soccer, the team with all of the good players cannot possible play all of the players at the same time so there is a shortage of talent playing at a particular time due to those players sitting on the bench.
ReplyDelete