Question

Explain how salary caps work in American sports. Be sure to explain who gains, who loses, and the effects on competitive balance. (15 points)

Answer 1

The salary cap is the basic agreement or strategy of investment and expenditure related limit of amount that is spend on players salary, many sports leagues and associations have implemented salary cap to manage the overall cost in a limit and to maintain a competitive environment in sports that prevents richer sports associations signing more top players at a higher cost in comparison to their rivals.it was first implemented during 1984-1985 season

Gains-

I. The salary cap system limits the wealthy teams signing multiple high rated players.

II. Limit money power in game.

III. Contribute a long term stability to the team

IV. It enable smaller franchise to remain competitive .

V. Help small team to maintain their broadcast and fan base.

VI. Salary cap made the team ownership more managable.

Loss-

I. Salary cap decreased the potential income for players.

II. Supressed the players wages below what they can achieve in a truely free market.

After the implementation of salary cap it is often believed that the top rated players how demanded a much higher salaries came under a limited wage system and prevented wealthy associations from gathering talents and thereby composing a team on smaller payroll at a competative disadvantage,and allowed to organise ateam with a few high performing players and average performing players.which will increase the overall performance of the team and the competitive balance of the league . And gradually the media exposure of the league will increase which will draw a higher revenue to the association .