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Spring 2009
ISSN 0890-913X
Volume 24, Number 2

Teaching How Private Enterprise Works Using Professional Sports: A Brief Note on the Case of Individual NHL Players' Salaries

Richard J. Cebula, Armstrong Atlantic State University
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/jpe/index.php?action=ajax&rs=GDMgetPage&rsargs[]=Spring2009 12.pdf&rsargs[]=0
TheJournalofPrivateEnterprise24(2),2009,165-174TeachingHowPrivateEnterpriseWorksUsingProfessionalSports:ABriefNoteontheCaseofIndividualNHLPlayersSalariesRichardJ.CebulaArmstrongAtlanticStateUniversityAbstractAsprivateenterprisesintheU.S.andCanada,franchisesintheNationalHockeyLeague(NHL)canbepresumedtobefirmspursuingmaximumprofits.PartofthispursuitinvolvesthenegotiationbetweenNHLplayersandmanagementofplayersalaries,which(amongotherthings)mustbeconsistentwiththeproductivitylevelofeachplayer.Thiseducationalnoteendeavorstoempiricallyidentifykey,quantifiablefactorsthatreflectindividualNHLplayerproductivityandasaresulthelptodeterminetheregularseasonsalarystructureforindividualNHLplayers,whethertheybegoalies,centers,wingmen,ordefense-men.Ideally,suchinformationcanbeusefulforthestudentofprivateenterpriseinsofarasitprovidesinsightsrelevanttofreemarketdecisionsandoutcomesinvolvingmarginalrevenueproduct.Thus,thiseducationalnotedemonstratestothestudentofprivateenterprisehowsystematicmeasuresofplayerproductivityhelptoexplainNHLplayersalaries.JELCodes:A11,J31,L22Keywords:Salarydetermination;Marginalrevenueproduct;ProductivitymeasuresI.IntroductionInthefreeenterprisesystem,profitmaximizationforthefirminvolvesacomplexsetofconsiderations.Someofthesearerathereasilyobtained(forexample,demographicinformationononespotentialcustomerbase),whereasotherconsiderations(suchasthecomplexnatureofmarketdemandanditsshiftsovertimeandspace)aremoreelusive.Furthermore,fromtheproduction/costsideoftheprofit-maximizationendeavor,issuessuchaslaborproductivitymeasurementarenotalwaysimmediatelyobviousandeasilyquantifiable.Yet,efficientoperationoffirmsinaprivateenterprisesystemrequiressomeformofsystematicmeasureofproductivityto165
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