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A Nash Bargaining Model of the Salaries of Elite Free Agents

Listed author(s):
  • John L. Solow

    (Department of Economics, University of Iowa, Iowa City, IA, USA,

  • Anthony C. Krautmann

    (Department of Economics, DePaul University, Chicago, IL, USA)

In this paper, we focus on how rents are divided between an elite free agent and a team in a Nash bargaining framework. In order to find the Nash bargaining solution, we identify the threat points of the player and the team as the best alternative bargains that the player and the team could reach with another team and another player, respectively. We then extend the analysis to include a consideration of multiple teams potentially bidding for the free agent’s services. In this section of the paper, we show that the player’s ultimate location and salary are determined by his marginal value over his replacement.

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Article provided by in its journal Journal of Sports Economics.

Volume (Year): 12 (2011)
Issue (Month): 3 (June)
Pages: 309-316

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Handle: RePEc:sae:jospec:v:12:y:2011:i:3:p:309-316
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