Show me the steps to solve:
2. Suppose that the average NFL fan has a favorite team that they are willing to pay
$100 per season for the ability to watch all of their games and then has a second favorite team that they are willing to pay $20 to watch all of their games and then is willing to pay $1 for the rights to watch each of the other 30 teams. The marginal cost of providing a fan with all of a team’s games is $0.
a. If the NFL allows each individual team to sell their own television package to fans around the country, and there are a roughly similar number of fans that have a specific team as their favorite or their second favorite team, what price will each team charge for their team’s television package?
b. Suppose that there are a roughly similar number of fans that have a specific teams as their favorite, but half of all fans like to watch Patrick Mahomes, so Kansas City is the second favorite team of half of all NFL fans. What price will Kansas City charge for their team’s television package.
c. Now suppose that the NFL, tells teams that they cannot sell individual team television packages and fans instead must purchase the “NFL Sunday Ticket” package which includes the ability to watch every NFL game with every team. How much will the NFL charge for the “NFL Sunday Ticket”?
d. Do you think the NFL should be allowed to sell only the NFL Sunday Ticket and be able to prohibit teams from selling their team’s games directly to fans? Explain.