2: Is MLB a "Fair" Market for Players?
Use an on-line glossary
to define: market, competitive market, non- competitive market
What are the characteristics
of a competitive market?
In competitive markets,
factor inputs are sold at "market" prices. If market is not
perfectly competitive, factor prices will be lower, all other things
being equal, than they would be in a perfectly competitive case.
Use the MLB: Perfect
retrieval chart to determine how MLB meets the criteria for perfectly competitive
- Limits on the
number of buyers for players factor inputs (labor): only 30 teams
in MLB; limits on the amount of factor inputs clubs can buy (25 player
- Uniform Player Contracts:
amateur players must be drafted by MLB clubs. Players must sign with team
that drafts them and play for 5 years. Cannot negotiate with other clubs while
under contract. Free agency is only available after 3 full years in MLB.
- Binding arbitration
- players cannot sell inputs to highest bidder.
- Owners' collusion
- owners agree to keep salaries low; agree to consult other owners
on pay scale.
- Limited markets
for the skill players possess no substitution of skills across sports.
do these criteria apply to the National Football League?
go on to Part 3