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Freakonomics: The Economic Battlefield of the NBA Lockout

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By David Berri of Freakonomics

With the NBA away, sports fans are looking for something to satisfy their need to watch teams strive for victory. Well, why not take a look at the teams competing in the lockout?

Okay, maybe this is a contest only a sports economist could love. But while it may not appeal to everyone, the labor dispute is still best thought of as a contest between two teams.

The first team is the NBA owners. The owners are the dominant buyer in the world market for elite basketball talent, so they have substantial monopsony power. In the other corner are the players, who are currently trying to disband their union. This union gave the players monopoly power in the sale of elite basketball talent (more specifically, in helping to determine the conditions under which individual players would sell their services). When a monopsony meets a monopoly on the economic battlefield, the outcome is determined by bargaining. And in that case, bargaining power – or what we call leverage – means everything.

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