Problem 1: Labor Unions. The aggregate supply of cricket players is given by w = 75 + 2L and the aggregate demand for cricket players is given by w = 315 −4L 1. First assume that the players and the teams are all in perfect competition. a) Find the equilibrium number of players. Find the equilibrium wage. b) Find the league surplus and player surplus.
E2
Problem 1: Labor Unions. The
w = 75 + 2L
and the aggregate demand for cricket players is given by
w = 315 −4L
1. First assume that the players and the teams are all in perfect competition.
a) Find the equilibrium number of players. Find the equilibrium wage.
b) Find the league surplus and player surplus.
2. Next assume that the players form a union, but the teams are in perfect competition.
a) Find the equilibrium number of players. Find the equilibrium wage.
b) Find the league surplus and player surplus.
3. Now assume that the teams also form a league, creating a bilateral
players have a well-established union, and thus have slightly more power in negotiation.
In particular, the union’s bargaining power is β = 3
5.
a) Find the equilibrium number of players.
b) What is the wage that gives players all the surplus?
c) What is the wage that gives league all the surplus?
d) Find the negotiated equilibrium wage.
e) Find the league surplus and player surplus.
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