What has the effect of the salary cap been in the NBA and the NFL?
[I’m not a fan of either sport; more information would be welcome here.] When the NBA instituted a cap, the league was in financial trouble; four teams were on the brink of bankruptcy and most of the others were in trouble. The owners opened their books to the players to prove this. The teams and union agreed to a cap of salaries at 53% of revenues, which was reportedly higher than the 50% that the players had earned the previous year. The cap level has now been raised to 59%; there are also ongoing disputes about how to allocate certain types of revenue. This was a soft cap, allowing teams to go over the cap to sign their own free agents. As a result, several teams have found that they can attract free agents despite being over the cap, by signing them to artificially low one-year contracts and then retaining them for later years at market value. Other teams have gone well over the cap by drafting their players, and then paying market value to retain them. In 1993-1994, all but one of
