Answered step by step
Verified Expert Solution
Question
1 Approved Answer
(32 marks) Owners and players alternate making offers over how to split $4.5 billion based on how many days are remaining in a season that
(32 marks) Owners and players alternate making offers over how to split $4.5 billion based on how many days are remaining in a season that would normally last 225 days. One offer is made per day, which can be accepted or rejected. Once an offer is accepted, the season begins with however many days are remaining and with the revenue sharing that was accepted. For simplicity, assume each day generates the same amount of revenue. Owners make the first offer and have an outside option of $11 million per day and players have an outside option of $3 million per day. a. (6 marks) Complete the following table. (Each blank is worth 0.25 marks.) b. (2 marks) If the players had made the first offer, briefly explain what the initial split would have been. (Hint: you do not need to redo the entire table... you just need the entry for 225 days remaining.) Imagine that, instead of saying who makes the first offer, a fair coin is flipped to determine who does it and that both owners and players are indifferent to the risk involved of getting the wrong side of the deal. c. (2 marks) Calculate the initial split that either side could offer before the coin flip that would that would be acceptable to both sides. (32 marks) Owners and players alternate making offers over how to split $4.5 billion based on how many days are remaining in a season that would normally last 225 days. One offer is made per day, which can be accepted or rejected. Once an offer is accepted, the season begins with however many days are remaining and with the revenue sharing that was accepted. For simplicity, assume each day generates the same amount of revenue. Owners make the first offer and have an outside option of $11 million per day and players have an outside option of $3 million per day. a. (6 marks) Complete the following table. (Each blank is worth 0.25 marks.) b. (2 marks) If the players had made the first offer, briefly explain what the initial split would have been. (Hint: you do not need to redo the entire table... you just need the entry for 225 days remaining.) Imagine that, instead of saying who makes the first offer, a fair coin is flipped to determine who does it and that both owners and players are indifferent to the risk involved of getting the wrong side of the deal. c. (2 marks) Calculate the initial split that either side could offer before the coin flip that would that would be acceptable to both sides
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started