Final answer:
Peter believes that out of the 20,000 players, there are only 25 they could afford due to the fixed budget for player salaries, which mirrors households' fixed entertainment budgets. Additional factors include the lower economic multiplier for sports and fairness in salary negotiations influencing the financial constraints of the team.
Step-by-step explanation:
Peter likely believes that out of the 20,000 players, there are 25 they could afford based on the economic principles outlined by Siegfried and Zimbalist, which suggest that the salary constraints are linked to the fixed entertainment budget of households. If a baseball team has a limited budget for player salaries, they must allocate that budget across the players they wish to hire. Considering the market and the average salaries demanded by players, only a subset of them will be financially viable options for the team. This mirrors how households with fixed entertainment budgets can only allocate funds to certain activities, implying that the baseball team operates within similar financial constraints.
Moreover, the idea that some local entertainment options, which may involve spending money on lower-income venues, could have a larger multiplier effect on the economy than professional sports, further constrains the budget available for player salaries. Teams might operate under the assumption that their spending will have a lower economic impact, thus enforcing a stricter salary cap to maintain financial sustainability.
Another contributing factor could be the experimental data that suggest players are not always self-interested and that elements of fairness can influence negotiation outcomes for salaries. Given that players might accept salaries that are deemed fair rather than maximized, it sets a realistic boundary on how much a team can offer. Peter's belief in the number of affordable players could stem from an understanding of these dynamics, which suggest that only a small proportion of players will fit into the team's financial structure and self-imposed constraints.