Question

Explain how player talent and talent costs affect demand, ticket prices, and profits of a sports team. In what cities would you expect the most talented players to play in? Why?

Answer 1

Player talents affect the component of economic profit because more talent will mean more demand for tickets which can increase profit.
In the case of shared revenue, the lower talented team might gain more of a profit of sharing revenue than the higher talented team compared to if the higher talented team would have gained if they had done unshared revenue. Profit-maximization may eventually constrain winning. Given profit-max., owners continue improving their team only if Demand is increasing, outpacing costs. If this ceases, owners' incentives to improve team may dissipate which results in limits to a franchise's long-run success. Best team owners are utility-maximisers, not profit maximizers.
Most talented players would prefer to play in urban cities because there will be more crowd coming in huge numbers to watch them which is good for their confidence and also they will get better compensation as the revenue generated will also be more.