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1'1 (all) l Fills}. where all indi :ates Team 1's winning proportion. Demand for wins for Team 2 is I'2[1u2) _ 15H Tr'51u2 where m2
1'1 (all) l Fills}. where all indi :ates Team 1's winning proportion. Demand for wins for Team 2 is I'2[1u2) _ 15H Tr'51u2 where m2 indicates Team 2's winning proportion. They are the only two teams in the league, so m2 l on. 'With no league policy, we calculated the equilibrium in Midterm l: w. _ 2 mg _ 2, MC _ an, To, _ 24, T .72 _ 3a, a, _ a, and s2 _ 2? 5 '| 1. N ow, suppose that the league institutes a revenue sharing agreement where each team pays the other team or [1.3 share of their revenues. :1] Draw each teanfs marginal revenue before revenue sharing. Label any intercepts. b) 0n the same graph, drav.r each team"s marginal revenue after revenue sharing. Label any intercepts. (3) Do any of the equilibrium values [winning percentages, payTolls, prots] chrmge'? 2. Suppose instead that the league wants to implement a salary cap. What is the salary '11: 1- '.ap M (3 that achieves perfect balance w. m2 ? 3. Suppose instead that the league implements a very simple form of luxury tax. 111 pzu'ticular, the league mixes only Team 2's revenue at a rate of onethird [or o: 1,} For simplicity, assume the tax revenue is pasted by league's commissioner on expensive tars. a] What is Team 2's marginal revenue MN; after being taxed at a rate a .-,. b) 'Nhat are the new equilibrium winning percentages, m1 and mg
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