The Dynamic Advertising Effect of Collegiate Athletics

Abstract

I measure the spillover effect of intercollegiate athletics on the quantity and quality of applicants to institutions of higher education in the United States — an effect popularly known as the "Flutie effect." I treat athletic success as a stock of goodwill that decays over time, similar to that of advertising. A major challenge is that privacy laws prevent us from observing information about the applicant pool. I overcome this challenge by using order statistic distribution to infer applicant quality from information on enrolled students. Using a flexible random-coefficients aggregate discrete choice model that accommodates heterogeneity in preferences for school quality and athletic success, as well as an extensive set of school fixed effects to control for unobserved quality in athletics and academics, I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant, long-term goodwill effect on future applications and quality. However, students with lower-than-average SAT scores tend to have a stronger preference for athletic success, whereas students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics' goodwill is significant only for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with lower-scoring students than with their higher-scoring counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students.

Keywords: advertising, choice modeling, entertainment marketing, heterogeneity, panel data, structural modeling