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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.

Suggested Citation

  • Lawrence M. Kahn, 2007. "Markets: Cartel Behavior and Amateurism in College Sports," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 209-226, Winter.
  • 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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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.21.1.209
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    References listed on IDEAS

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    1. Betsey Stevenson, 2010. "Beyond the Classroom: Using Title IX to Measure the Return to High School Sports," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 284-301, May.
    2. 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.
    3. 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 671-684, October.
    4. 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.
    5. 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.
    6. 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.
    7. Carroll, Kathleen A. & Humphreys, Brad R., 2000. "Nonprofit decision making and social regulation: the intended and unintended consequences of Title IX," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 359-376, November.
    8. 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.
    9. Franklin G. Mixon, Jr. & Len J. Treviño, 2004. "How Race Affects Dismissals of College Football Coaches," Journal of Labor Research, Transaction Publishers, vol. 25(4), pages 645-656, October.
    10. Roger G. Noll, 2003. "The Economics of Baseball Contraction," Journal of Sports Economics, , vol. 4(4), pages 367-388, November.
    11. 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.
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    Citations

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    Cited by:

    1. Kelly M. Hastings & Frank Stephenson, 2015. "The NBA’s Maximum Player Salary and the Distribution of Player Rents," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 3(2), pages 1-9, March.
    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. Adam Hoffer & Brad R. Humphreys & Donald J. Lacombe & Jane E. Ruseski, 2014. "The NCAA Athletics Arms Race: Theory and Evidence," Working Papers 14-29, Department of Economics, West Virginia University.
    4. Böheim, René & Lackner, Mario, 2012. "Returns to education in professional football," Economics Letters, Elsevier, vol. 114(3), pages 326-328.
    5. 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.
    6. Peter K. Hunsberger & Seth R. Gitter, 2015. "What is a Blue Chip Recruit Worth? Estimating the Marginal Revenue Product of College Football Quarterbacks," Journal of Sports Economics, , vol. 16(6), pages 664-690, August.
    7. repec:pri:cepsud:162rosen is not listed on IDEAS
    8. Robert W. Brown & R. Todd Jewell, 2013. "Revenues and subsidies in collegiate sports: an analysis of NCAA Division I women’s basketball," Chapters,in: Handbook on the Economics of Women in Sports, chapter 10, pages 213-232 Edward Elgar Publishing.
    9. Chen, Zhuoqiong & Ong, David & Sheremeta, Roman, 2015. "Competition Between and Within Universities: Theoretical and Experimental Investigation of Group Identity and the Desire to Win," MPRA Paper 67522, University Library of Munich, Germany.
    10. Peeters, Thomas, 2012. "Media revenue sharing as a coordination device in sports leagues," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 153-163.
    11. repec:kap:revind:v:52:y:2018:i:2:d:10.1007_s11151-017-9602-z is not listed on IDEAS
    12. 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.
    13. Brad R. Humphreys & Jane Ruseski, 2014. "Adolescent Steroid Use and Intercollegiate Athletic Incentives," Working Papers 14-25, Department of Economics, West Virginia University.
    14. Thomas Peeters, 2011. "Optimal gate revenue sharing in sports leagues," Working Papers 1122, International Association of Sports Economists;North American Association of Sports Economists.
    15. John Fizel & Charles Brown, 2014. "Assessing the Determinants of NCAA Football Violations," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(3), pages 277-290, September.
    16. 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.

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