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The Economics of College Sports: Cartel Behavior vs. Amateurism

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  • Kahn, Lawrence M.

    () (Cornell University)

Abstract

This paper studies intercollegiate athletics in the context of the theory of cartels. Some point to 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. The athletes producing these rents are disproportionately African-American, while the beneficiaries are primarily white. The rents are typically spent on coaches’ salaries, facilities, and nonrevenue sports. Although athletic departments considered as businesses lose money on average, there is some evidence, although not unanimous, that they generate alumni contributions, state appropriations, and additional student applications.

Suggested Citation

  • Kahn, Lawrence M., 2006. "The Economics of College Sports: Cartel Behavior vs. Amateurism," IZA Discussion Papers 2186, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2186
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. John Goddard & Peter J. Sloane, 2005. "Economics of sport," Chapters,in: Economics Uncut, chapter 12 Edward Elgar Publishing.
    7. Brad R. Humphreys, 2006. "The Relationship Between Big-Time College Football and State Appropriations for Higher Education," International Journal of Sport Finance, Fitness Information Technology, vol. 1(2), pages 119-128, May.
    8. Brad R. Humphreys, 2003. "The Relationship Between Big-Time College Football and State Appropriations to Higher Education," UMBC Economics Department Working Papers 03-102, UMBC Department of Economics.
    9. 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.
    10. 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.
    11. 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.
    12. 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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    More about this item

    Keywords

    cartel; college athletics; monopsony;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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