7. Assume that a Major League Baseball team is considering whether to draft (hire) a talented...

 

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7. Assume that a Major League Baseball team is considering whether to draft (hire) a talented new player. The team has a 2-period time horizon: In the first period, the player is placed with their minor-league franchise to undergo additional training and conditioning. All of the fixed hiring/training costs occur in the first period (i.e., period 0). In the second period (i.e., period 1), the player's expected contribution to the team increases (as does his salary). After period 1, the player becomes a "free agent" and can be acquired by any team. a. b. C. Hiring/Training costs MRP during training MRP, after training "discount rate" = $80,000 = $100,000 = $400,000 = 5% (.05) If all the skills acquired during the minor leagues are general, what wage would this player receive during and after training? Suppose the training is mostly specific and the firm will pay the player their MRP during training and recoup the cost afterward. What wage would the firm pay during both periods? What is the problem with this wage strategy? Suppose now the firm pays a Training Wage (required by current CBA in MLB) in period 0 = $60,000, determine the wage rate that the firm would pay in period 1 so that it equates the present discounted value of marginal labor cost and marginal revenue product. Graph your results. 7. Assume that a Major League Baseball team is considering whether to draft (hire) a talented new player. The team has a 2-period time horizon: In the first period, the player is placed with their minor-league franchise to undergo additional training and conditioning. All of the fixed hiring/training costs occur in the first period (i.e., period 0). In the second period (i.e., period 1), the player's expected contribution to the team increases (as does his salary). After period 1, the player becomes a "free agent" and can be acquired by any team. a. b. C. Hiring/Training costs MRP during training MRP, after training "discount rate" = $80,000 = $100,000 = $400,000 = 5% (.05) If all the skills acquired during the minor leagues are general, what wage would this player receive during and after training? Suppose the training is mostly specific and the firm will pay the player their MRP during training and recoup the cost afterward. What wage would the firm pay during both periods? What is the problem with this wage strategy? Suppose now the firm pays a Training Wage (required by current CBA in MLB) in period 0 = $60,000, determine the wage rate that the firm would pay in period 1 so that it equates the present discounted value of marginal labor cost and marginal revenue product. Graph your results.

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ANSWER a If all the skills acquired during the minor leagues are general the player would receive 10... View the full answer