Jan 23, 2017

What is revenue?

- Thi+T2 = (a-bw.)w, -cw. + (02-bz (1-w,))(1-wil-c(1- Wil d = a.- 2b. W.-A2+ 2b2(1-W.)=0 → 01-A2+2b2 =2(bi- bz) W.

What drives the matter?

We also discuss several other topics like assume that an economy produces only two goods, pizza and wings. place the events in order, to show how an improvement in pizza-making technology would lead to an increase in wing production.
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21b-bz)

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Case 1: Revenue Shaning

Team a: a[ca, b, W.) Wi]+ (1-0) [(a2-bz WelWz]-cw. * can't Sub in W2= 1- W. because each choose how much they win

Why lots of talent usually imply a very large payroll?

We also discuss several other topics like jay nelson depaul

d = a[a.- 2b. W.]-C=0

d2 = a[02-2002 W 2]-C=0 dw.

due

rn

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Wi= airc

abi

i wisaai-c

2ob.

s Revenue sharing causes the "Smaller toom to

pay less (pay cuts) but it also pushes it down for the other team.

MR2

(Big)

>W,

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Cose 2: Salary caps (max that can be paid in salaries

cwi=CW2 :. Wi=W2=0.5 (a way to force teams to win half the IMR We also discuss several other topics like stat210

IMR,

time)

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1.

Team

1 will not want to win half

the

time

2. MG, MR,

tom 1 will still not win half the time

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3. MG, EMRI

ve any outcome other than

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optimality will harm

the league

> Wt 0.5

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Case 3: Draft

IMR

mra

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The draft causes W. to increase and W2 to decrease (equalize)

MC increases C2 green arco is the increase is Salary, given

to the new drafted player MR. If you want to learn more check out rpi physics

IMRs

+ soup

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of the small team hos bad management then even with the talent they are unable to doelop it

wie

* will consistently drive Up wages.

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Jan 25, 2017

Cose

#4: Luxury tax

IMRI

imkz

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if you spend beyond a certain limit

you will be taxed Payrol 1: Cuit (T) if a team is spending more Payrol 2: cw* (T) than another it is because

w 15 larger than 0.5 * under luxury tax team will want to win more

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a tax premium

imposed

and team 2 a little less This causes a shift and c (mc) decreases (the players

are essentially the ones being taxed)

wit 0.5 Wzt -

not paid as much

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> Team 2 payroi is decreases (cv, wv)

Team payrou could have both increased or decreased lambiguous change) (C#, wi)

MR. i

mRz

in this case the tax has no impact both teams

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are within the bounds.

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Optima)

* Lots of talent usually implies very large payrol

-

-

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-

O

1

0.3 - 0.7 -

Ware

0.7 -0.3

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* Cose 1; stick it to the players (Rev.Sharing)

Cose 2; Competitive balance & Shick it to the

players (Salary cap) Case 3; Competitive balance and beneficial to

players (draft) Cose 4; Compentive bannce and shok it to the

ployes (lux tox.)

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mo

MR2

Both teams are affected if bellow 50%. mc will decrease so players are affected but thais.

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*can be replicated w/ revenue Sharing slump sum tax if only 1 team is affected by the tax

1+ti[pixi + P2 X2] = m pixi + P2X2 = m-T -m-Tom → T=(1+m ) = m = tm

HE THEN HE Itt

att

*winning or doesn't change

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| Team, 2 periods : t - to day , tt1 - next year

every team is endowed with a certain amount of winning 'e Utility (I) = WE With

Pt. Wt - Peti Weti = Peet +Petiltti (Budget constraint) L = WE Wilti tx [Peet+ Peti let - pt Wt - ptti Wrel) First Order conditions; (cobb- Douglas)

22=0 2L =0

a to a

21

w

wt = a t = a

+ (PE

& (Pelt & Periltal) awe awh 2x

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PE

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Peti

With = ß * (Ptle + Perill

+ assume pt=1; pter * U = ln We + Bin Werlin (We will

becomes a relative price If We = ln (optimale endouremont)

et=a (et +Pt+iltel) pe+ = et (or+ß) - et = et artß

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etti

of a → how much you care

Sie weset (you have to borrow)

in Sports if you need more talent

raiding Savings (minor leagues)

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about winning Now

& how much you care about winning NEXT YEAR

how much

O

are

working players to death

+ price is what drives

the

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market.

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