Wednesday, June 2, 2010

Price Floor

You know, if all of the NBA owners got together to try to fix player salaries and determine who would play where next year, I bet that the union would be all over that case. However, when Lebron James, Dwayne Wade, Chris Bosh, and Joe Johnson want to meet to discuss plans for next year, nobody seems to have a problem with it. Maybe this is not their intent whatsoever, but they could totally play the owners by raising the price of each other. For example, say they all wanted $100,000,000. If they all agreed to remain at that price, they all would get it. Without this agreement in place, one of them could get a smaller contract and therefore eliminate the higher priced options from other teams. Again, maybe they are just meeting to talk, but it seems a bit unfair that these guys, even though they are some of the best players in the NBA, could get together and set a price floor. It may work out well for them financially, but as I learned in economics, whenever you fix the prices, you get inefficiency. In this case, this inefficiency is the added money that these guys could receive above what they are worth that could've been spent on bringing in other parts to build a championship team. Basketball is more than a one-man game.
Photo by AndyRob on Flickr

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