Salary Vs. marginal revenue product under monopsony and competition: The case of professional basketball
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- Scott, .A., Long, .E. & Somppi, K. Atlantic Economic Journal (1985) 13: 50. doi:10.1007/BF02304294
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Summary and Conclusions
A large percentage of sports fans and the general public consider professional athletes to be overpaid. Of course, given their unique skills and abilities, athletes' salaries are high compared to other vocations. The relevant concept of overpayment, however, is in relation to a player's worth to his team. The fan or observer who recognizes that high salaries may in fact reflect players' abilities and contributions to team success, both on the playing surface and at the bank, is probably in the minority. In this paper, it has been argued that the exploitation of athletes depends on the structure of the labor market in professional sports. Despite their high salaries, professional athletes have not always (and some still do not) enjoyed a privilege available to both fans and owners — the privilege of selling their skills to the highest bidder.
Previous studies have concluded that restrictions on baseball players' mobility depressed their salaries belowMRP's, and that removal of these restrictions resulted in salaries reflecting a player's value to his team. In this paper, it has been found that the same phenomenon has occurred in basketball, with salaries rising to the level ofMRP when players were given virtually unlimited freedom to negotiate. In addition, no significant evidence of racial discrimination was found in the NBA. The labor market in professional basketball might thus serve as a role model for baseball and football.