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Revenue-sharing in professional sports. Assume that there are two grades ofprofessional football players. There are a...

  1. Revenue-sharing in professional sports. Assume that there are two grades ofprofessional football players. There are a limited number of “stars,” whom thefans most want to watch, and an unlimited number of “nonstars.” There are toofew stars to fully staff each team, but there are enough for a few to be on each team if an owner decided to hire them. (No knowledge of sports or football is necessary to answer this question. But if you would like some background on revenue-sharing in sports with explanation of some of the issues, see this link.)

    1. Assume that football teams keep all the “gate” and TV revenues theygenerate and that players are free to choose their teams at the end of any season. Do stars earn more than nonstars? How are the wages of each group determined?

    2. 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 (theyput them into a “pool” and divide it equally among the team owners).What happens now to salaries of stars and nonstars?

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