LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
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Chapter 10, Problem 14P
Major League Baseball players are not eligible for arbitration or free agency until they have been in the league for several years. During these “restricted” years, a player can only negotiate with his current team. Consider a small-market team that happens to own the rights to last year’s Rookie-of-the-Year. This player is currently under contract for $500,000 for the next 3 years. Because his current team is in a small market, the player’s value to his current team is $6 million per year (now and in the future) When the player becomes eligible for free agency, he will likely command $10 million per year for 7 years in free agency from competing large-market teams. In the questions below, assume the player wants to maximize his lifetime earnings.
- (a) What is the worst 10-year contract extension from the player’s point of view that the player would accept from his current team?
- (b) What is the best 10-year contract extension from the player’s point of view that his current team would offer him?
- (c) Would you expect this player to sign a contract extension or to play out his contract and enter free agency 3 years from now?
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Chapter 10 Solutions
LABOR ECONOMICS (LL+ACCESS)
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prob. 11RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10PCh. 10 - Prob. 11PCh. 10 - Prob. 12PCh. 10 - Prob. 13PCh. 10 - Major League Baseball players are not eligible for...Ch. 10 - Prob. 15P
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