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Running head: SUPPLY AND DEMAND IN PROFESSIONAL SPORTS1Supply and Demand in Professional SportsStudent’s First name & Last nameInstitution nameCourse TitleInstructor’s nameNovember 19, 2015
SUPPLY AND DEMAND IN PROFESSIONAL SPORTS2Supply and Demand in Professional SportsA brief review of the economic concepts in professional sportsA sports league is a group of team owners who decide on a common set of operatingguidelines, which brings in more profits than had each owner decided to act on his or herown. Such guidelines include restrictions on the entry of any new teams, allocating full andexclusive franchise rights, and coming up with an agreeable revenue sharing formula, luxurytax, or salary cap. Some of these practices can be illegal in many other industries; howeverbaseball, together with some other leagues, is formally exempted from the laws prohibitingthese practices (also called antitrust statutes) following a unanimous court decision in 1922the caseFederal Baseball versus National League [ CITATION Gri03 \l 1033 ].The ruling of the case was that baseball was not operating an interstate commerce andcould, therefore, be exempted. The legal standing concerning collusion in baseball has onseveral occasions been reaffirmed by numerous court decisions since then. This has allowedteam owners to collude on prices, revenue shares, advertising, and player salaries. Otherleagues such as Basketball do not enjoy the same level of formal exemption bar in two areas.The first of these is when a collective bargaining agreement exists, and then player-leaguecontracts are exempted from the antitrust statutes. The second was first introduced in 1961when Congress passed the Sports Broadcasting Act (which was amended in 1966), thatallowed for the extension of the antitrust exemption to include the negotiations and sale ofTV broadcasting rights[ CITATION Gri03 \l 1033 ]. This legalizes the league packaging ofrights for sale to the networks.Historically, nearly all of the leagues in North America came up with collusiveagreements that oversaw the selection (the entry drafts), contractual arrangements (thereserve clause), and distribution of players among a league’s several clubs. In baseball, the
SUPPLY AND DEMAND IN PROFESSIONAL SPORTS3exploitation of players kept salaries well below the value of the player to a team until 1976.This also happened in basketball until the mid-1970s and also in hockey and football untiljust a few years ago. The first league players to be considered free agents through bindingarbitrations were Andy Messersmith (of the Los Angeles Dodgers) and Dave McNally (of theBaltimore Orioles) in 1976[ CITATION Par12 \l 1033 ]. The owners consequently fired the

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