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>ESSAYS IN APPLIED MICROECONOMICS: EVIDENCE OF NON-PROFIT MAXIMIZING FIRM OWNERS AND BARGAINING WITHIN THE SHADOW OF THE LAW (EXPERIMENTAL, LEGAL COSTS, TRIALS, PROFESSIONAL SPORTS, REVENUE SHARING).
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ESSAYS IN APPLIED MICROECONOMICS: EVIDENCE OF NON-PROFIT MAXIMIZING FIRM OWNERS AND BARGAINING WITHIN THE SHADOW OF THE LAW (EXPERIMENTAL, LEGAL COSTS, TRIALS, PROFESSIONAL SPORTS, REVENUE SHARING).
In the first essay, evidence is provided on the appropriateness of an alternative theory of profit-maximizing behavior applicable to the National Football League. The approach is to develop a theoretical model of a professional sports team that focuses on the effects of revenue sharing on salaries and the distribution of playing talent. League MRPs and own team MRPs are estimated by estimating a production function for wins and revenue functions. These are compared to actual salaries to test the hypotheses resultant from the theoretical model. Our results suggest that NFL owners are not profit maximizers. Estimated league MRPs were found to be near zero, implying that team MRPs were also near zero. In addition, results suggest that the owners have maximized total league revenue and, at the same time held down labor costs through near equal revenue sharing. Instead of realizing these profits, the owners are trading off a portion of them by bidding up salaries in pursuit of obtaining winning teams.;In the second essay, a model of the pretrial bargaining process is developed for three methods of allocating the costs of trial. The three institutions are the American system in which both parties bear their own legal costs, the British system where the loser pays the cost of both parties, and rule 68 where a party who rejected a pretrial offer must pay the costs of both parties if the judgment was not more favorable than the offer. The models are used to predict the frequency and efficiency of pretrial bargaining success for parties with different risk preferences and for various probabilities of prevailing at trial. The hypotheses are tested in an experimental setting. The data confirm the expectation that the British rule and rule 68 increase the chance of pretrial settlement over the American rule. In addition, the rule produced significant distributional differences in negotiated settlements.
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