Two grades of professional football

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Reference no: EM137190

Suppose that there are two grades of professional football players. There are a restricted number of "stars," whom the fans most want to watch, and an unrestricted number of "non-stars." There are only some stars to fully staff every team, but there are enough for a few to be on each team if an owner decided to hire them.

a. Assume that football teams keep all the "gate" and TV revenues they generate and that players are free to choose their teams at the end of every season. Does a star earn more than non-stars? How are the salaries of each group determined?

b. Continue to assume that players are free to choose their teams, but assume now that teams agree to share all their gate and TV revenues equally (they put them into a "pool" and divide it equally among the team owners). What happens now to salaries of stars and non-stars?

Reference no: EM137190

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