I need help understanding Salary caps in a profit maximising league. Basically, any help to better my understanding. Thus far, I've been looking at one's from Kesenne.

New Window [ Immersive Reader O 100 Page Colour Rule Lines Deleted Notes a 2 Translate Check Acce "INVARIANCE PRINCIPLE" > regulations will get subverted W (L) c ( L ) MRA- marginal revenue 50 CH MRA = MRB = C - as you will move you attract want casual pans MKA MRB CA - marginal cost profit maximising case brost to product Cc - Salary cap Is close league model - can't have both teams.. bus model - teams benefit salary cap - don't leone for competitive beatout 707. A 3070 B 160%. WA 7 Aw Big club owners demonstrate that they can lose $ 1007 . WB 07. WA CH MIA ARA = ARB = C = AC . if revenue sharing, smaller team can buy better players. from bigger to snarllorKesenne (2007) . Profit maximization + Salary Cap Two-club model ( hyperbolic function) X = large club y- small club MR. cap . X has high- budget, above cap live capx .y has low- budget, below cap line MR . high- bud will try to get as close as possible to it's profit - max demand curve . profits area below demand cure $ 50/50 17 above salary level Figure 7.1 Payroll capn LO Kesenne (2000) O . Big club X will hire more top players than small clubY be the market size has a positive effect on the marginal revenue. seen? . Demand curves for top players in bigt small - a Club (MRy) & MRX) drawn as linear downward CAP Sloping function - supply of top players ( LS ) . Labour market, point (A = distribution of playing talent on horizontal axis $ C* - CI Sollaly distribution on vertical axis . Top players = higher productivity, big clubs will hire move top players ZS . Model shows salary diff between Aplayes * grass it Figure |. Salary caps and mom can be wery lange if top players are in shore supply . CAP = amount of the hard salary cap