Use the reading from "Underpaid Millionaires" to learn about monopsony. What data do we have already that might lead us to believe MLB is a monopsony? If MLB is a monopsony (or other form of market failure) what does this imply for current players' salaries?
In The Business
of Major League Baseball, Gerald Scully reports that each win a team
records is worth approximately $1 million in revenue for that team.
Use the 1996 financial data for each team and the corresponding records
of each team to determine if Scully's theory is right.
If MLB was a truly competitive market, players would be paid up to nearly the amount of revenue they generate (economists call this a players' marginal revenue product). Read about how much great players are worth to their teams and determine what a "market" based salary for superstars might be. (http://asp.usatoday.com/sports/baseball/salaries/teamresults.aspx?team=24).
Are football players earning a market wage?
Return to the spreadsheet file for players' salaries. How many "superstars" are making this "market" wage? What does this imply about the market for MLB players? Are salaries "lower" than they would be in a competitive market? If Scully's theory about one win equaling $1 million, what should superstars make? Are they lower than "fair market" wages?Who has control over how much NFL clubs earn?