The Economics of College Sports: Cartel Behavior vs. Amateurism

33 Pages Posted: 24 Jul 2006

See all articles by Lawrence M. Kahn

Lawrence M. Kahn

Cornell University - School of Industrial and Labor Relations; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Date Written: June 2006

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.

Keywords: cartel, monopsony, college athletics

JEL Classification: L12, L44, I21

Suggested Citation

Kahn, Lawrence M., The Economics of College Sports: Cartel Behavior vs. Amateurism (June 2006). IZA Discussion Paper No. 2186. Available at SSRN: https://ssrn.com/abstract=918743

Lawrence M. Kahn (Contact Author)

Cornell University - School of Industrial and Labor Relations ( email )

265 Ives Hall
Ithaca, NY 14853-3901
United States
607-255-0510 (Phone)
607-255-4496 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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