Economics of College Sports

By John Fizel; Rodney Fort | Go to book overview

9

Measuring Marginal Revenue Product in College Athletics: Updated Estimates

Robert W. Brown and R. Todd Jewell


INTRODUCTION

Economists generally agree that National Collegiate Athletic Association (NCAA) rules have created a monopsony market in the recruitment of players for college football and men's basketball, the two “revenue-producing” sports for colleges. The NCAA limits compensation to players, restricts their mobility between schools, and controls championship competition. As a result, players' marginal revenue products exceed their effective compensation—which amounts to the value of an athletic scholarship and a small amount of outside earnings—so that colleges capture economic rents from players. Economists have offered few empirical estimates of the revenues generated by college athletes, and for good reason: The lack of reliable data on athletic revenues and the problem of measuring player skill levels make it difficult to relate college sports revenue to player productivity. 1

Brown (1993, 1994) provides the first econometric estimates of the rents generated by college athletes. Put simply, those papers estimate the marginal revenue product (MRP) of NCAA football and basketball players by regressing a college team's 1988-89 revenues on the number of its “premium players, ” defined as a college player who is drafted into the National Football League (NFL) or the National Basketball Association (NBA), holding constant other factors that influence revenues. Professional draft data proxies the skill level of an individual college football or basketball player: Each year professional sports teams search for new players to draft from college teams;

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