10 Suppose you own two professional sports franchises a base

10. Suppose you own two professional sports franchises, a baseball team and a football team. The market structure for professional sports franchises and the labor market for athletes is competitive. You are willing to pay each athlete on your team no more than his/her MRP. Define MRP and then describe, in as much detail as possible, the information/data that you would want to collect to estimate the MRP for the following players: a) A starting pitcher. b) A utility infielder. c) A quarterback. d) An offensive lineman.

Solution

The definition of the marginal revenue product is given by the product of price and marginal product in a competitive situation. Thus in this case: a) A starting pitcher would be measured by the amount of extra revenue that he generates. This could be given by the extra ticket sales that occur when this starting pitcher plays and so we would need these ticket sales details and also the price at which the starting pitcher was acquired. The product of these two would be the marginal revenue product.b) An utility midfielder would be measured based on the success of the team and so the additional victories that the team attains when that midfielder plays and so the extra prize money that the team wins as a result of that would be the marginal revenue of that player. The price would be the price at which the midfielder was purchased by the team. c) A quarterback would be evaluated by the touch downs that he scores per match, This would be the marginal revenue that he brings to the team. d) An offensive linesman will be evaluated based on the number of yards that he gains in every game. This is the additional value and hence the revenue that he brings to the team per game.