Suppose that next season, Pete will be worth $5,000,000 to the Mets and $3,000,000 to the Cubs.
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Question:
- Suppose that next season, Pete will be worth $5,000,000 to the Mets and $3,000,000 to the Cubs. Assume that negotiations between any of the parties is costless, both teams maximize profits, and that Pete has just finished playing under contract for the Cubs (that is, he is now a free agent).
Based on economic theory, which of the two labor market structures (free agency and no free agency) would result in Pete playing for the Mets, and why?
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