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Markets: Cartel Behavior and Amateurism in College Sports

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  • Lawrence M. Kahn

Abstract

This paper studies intercollegiate athletics in the context of the theory of cartels. Some point to the explicit attempts by the National Collegiate Athletic Association (NCAA) to restrict output and payments for factors of production as evidence of cartel behavior. Others argue that such limits enhance product quality by preserving amateurism. I find that the NCAA's compensation limits on athletes lead to high levels of rents from the entertainment revenues produced by the athletes, a finding consistent with the cartel interpretation. The athletes producing these rents are disproportionately African-American, while the beneficiaries are primarily white. The rents are typically spent on facilities, nonrevenue sports, and, possibly, head coaches' salaries. Big-time football and men's basketball programs earn accounting profits, although the athletic departments in which they reside make accounting losses on average. However, there is some evidence, albeit not unanimous, that sports generate alumni contributions, state appropriations, and additional student applications. But, arms race considerations suggest that there may be some societal gains to the aggregate limitation of spending on college athletics.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.21.1.209
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 21 (2007)
Issue (Month): 1 (Winter)
Pages: 209-226

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Handle: RePEc:aea:jecper:v:21:y:2007:i:1:p:209-226

Note: DOI: 10.1257/jep.21.1.209
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References

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  1. Lawrence DeBrock & Wallace Hendricks & Roger Koenker, 1996. "The Economics of Persistence: Graduation Rates of Athletes as Labor Market Choice," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 513-539.
  2. Betsey Stevenson, 2010. "Beyond the Classroom: Using Title IX to Measure the Return to High School Sports," CESifo Working Paper Series 2959, CESifo Group Munich.
  3. Hausman, Jerry A & Leonard, Gregory K, 1997. "Superstars in the National Basketball Association: Economic Value and Policy," Journal of Labor Economics, University of Chicago Press, vol. 15(4), pages 586-624, October.
  4. Daniel Sutter & Stephen Winkler, 2003. "NCAA Scholarship Limits and Competitive Balance in College Football," Journal of Sports Economics, , vol. 4(1), pages 3-18, February.
  5. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
  6. John J. Siegfried & Molly Gardner Burba, 2003. "The College Football Association Television Broadcase Cartel," Vanderbilt University Department of Economics Working Papers 0320, Vanderbilt University Department of Economics.
  7. Lawrence DeBrock & Wallace Hendricks & Roger Koenker, 1994. "The Economics of Persistence: Graduation Rates of Athletes as Labor Market Choice," Working Papers _001, University of Illinois at Urbana-Champaign, revised 1996.
  8. Brown, Robert W, 1993. "An Estimate of the Rent Generated by a Premium College Football Player," Economic Inquiry, Western Economic Association International, vol. 31(4), pages 671-84, October.
  9. Sarah E. Turner & Lauren A. Meserve & William G. Bowen, 2001. "Winning and Giving: Football Results and Alumni Giving at Selective Private Colleges and Universities," Social Science Quarterly, Southwestern Social Science Association, vol. 82(4), pages 812-826.
  10. Franklin G. Mixon, Jr. & Len J. Trevi�O, 2004. "How Race Affects Dismissals of College Football Coaches," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 645-656, October.
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Citations

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Cited by:
  1. PEETERS, Thomas, 2010. "TV revenue sharing as a coordination device in sports," Working Papers 2010005, University of Antwerp, Faculty of Applied Economics.
  2. Meer, Jonathan & Rosen, Harvey S., 2009. "The impact of athletic performance on alumni giving: An analysis of microdata," Economics of Education Review, Elsevier, vol. 28(3), pages 287-294, June.
  3. Mario Lackner & Christine Zulehner, 2013. "Rent Sharing and Gender Discrimination in Collegiate Athletics," Economics working papers 2013-09, Department of Economics, Johannes Kepler University Linz, Austria.
  4. Jill Harris, 2011. "The Demand for Student-Athlete Labor and the Supply of Violations in the NCAA," Working Papers 1115, International Association of Sports Economists & North American Association of Sports Economists.
  5. Jonathan Meer & Harvey S. Rosen, 2008. "The Impact of Athletic Performance on Alumni Giving: An Analysis of Micro Data," Working Papers 1046, Princeton University, Department of Economics, Center for Economic Policy Studies..
  6. Böheim, René & Lackner, Mario, 2012. "Returns to education in professional football," Economics Letters, Elsevier, vol. 114(3), pages 326-328.
  7. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists & North American Association of Sports Economists.
  8. Betsey Stevenson, 2007. "Title Ix And The Evolution Of High School Sports," Contemporary Economic Policy, Western Economic Association International, vol. 25(4), pages 486-505, October.
  9. Peter K. Hunsberger & Seth R. Gitter, 2014. "What is a Blue Chip Recruit Worth? Estimating the Marginal Revenue Product of College Football Quarterbacks," Working Papers 2014-03, Towson University, Department of Economics, revised Apr 2014.

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