This chapter discusses companies that are oligopolistConsider trade relations be
ID: 1195775 • Letter: T
Question
This chapter discusses companies that are oligopolistConsider trade relations between the United States and Mexico. Assume that the leaders of the two countries believe the payoffs to alternative trade policies are shown in the following payoff matrix:s in the market for the goods they sell. Many of the same ideas apply to companies that are oligopolists in the market for the inputs they buy. If sellers who are oligopolists try to increase the price of goods they sell, the goal of buyers who are oligopolists is to try to decrease the prices of goods they buy. Major league baseball team owners have an oligopoly in the market for baseball players. The owners’ goal is to keep players’ salaries , but this is difficult to achieve because . Baseball players went on strike in 1994 because they would not accept the salary cap that the owners wanted to impose. If the owners were already colluding over salaries, why did the owners feel the need for a salary cap? To help prevent future cheating To dissolve collusive behavior To increase the quality of players
Explanation / Answer
The Question is iincompplete. Please provide the payoff matrix mentioned in your question.
As far as the question is concerned as why the base ball players are opposing the salary cap and why the team owners are imposing it. The main reason for imposing the salary cap is to ensure that every team gets an equal pay irrespective of their performance. While another reason could be, if any player demands higher salary, then other players might also ask for higher salaries, hence, it would become very difficult for the team owners to hike the salary of every team players. In any case, one team owner hikes the salary of his team members, other member belonging to different teams might ask for hike in salary. This becomes very chaotic for a team owner.