The Impact of Athletic Performance on Tuition Rates
Alexander, Donald L., Kern, William, International Journal of Sport Finance
This paper explores the impact of intercollegiate athletic performance on tuition rates. A number of recent studies have examined the advertising effect generated by participation in intercollegiate sports. These studies have attempted to ascertain whether athletic performance improves student quality, graduation rates, and state appropriations. Only one previous paper examines the impact of intercollegiate athletics on tuition, and it found a positive impact on out-of-state tuition rates from participation in the NCAA men's basketball tournament. In this paper, we find that athletic performance as measured by win-loss records in football and basketball impacts both in-state and out-of-state tuition rates, though it appears that the effects are largely confined to members of the six major power conferences.
Keywords: athletic performance, tuition rates
Over the past two decades, a number of papers have investigated the impact of success in intercollegiate athletics on various aspects of university life, including alumni giving (Rhoads & Gerking, 2000; Goff, 2000; Baade & Sundberg, 1996; Humphreys & Mondello, 2007), state appropriations to universities (Coughlin & Erekson, 1986; Humphreys, 2006), student quality (McCormick & Tinsley, 1987; Tucker, 1992; Mixon, Trevino, & Minto, 2004; Tucker, 2005; Smith, 2008), and graduation rates (Rishe, 2000; Tucker, 1992; Bremmer & Kesselrig, 1993). In each of these instances, universities are viewed as having raised their public profiles as a consequence of their athletic successes and, as a result, have attempted to capitalize on those successes by securing larger contributions from alumni or greater appropriations from state legislators or by increasing the size and quality of their student bodies. These studies thus emphasize that intercollegiate athletics create an "advertising effect" that provides a means by which universities might generate increases in revenues and improve the quality of the institutions (McCormick & Tinsley, 1987). In simple terms, we can view intercollegiate athletics as a means by which universities attempt to shift the demand curve for their services to the right. If universities succeed on the field or on the court, this success may present them with an opportunity to increase enrollment or raise student quality or raise tuition.
Of course, university presidents will not, in all likelihood, directly address the increases in tuition and attribute them to this source. More commonly, university administrators will cloak tuition increases in terms of a need to cover increasing costs or some other more "legitimate" sounding rationale. This is much the same argument given by owners of professional sports teams in justification for rising ticket prices; "players' salaries have risen so we are increasing prices to cover those costs." But the direction of causation is reversed. Teams are willing to pay more for players because fans are willing to pay more to attend games. Similarly, we argue that universities spend more on athletics because they can raise tuition. This is due to the fact that students are willing to pay more to attend a school with a more prestigious reputation stemming, in part, from their success in athletics. The rise in tuition is then attributed to rising costs or an expansion of other university programs.
The aforementioned empirical studies have largely served to assess the extent to which these marketing efforts have been successful. The results of these studies have been something of a mixed bag, as some studies have reported that athletic success is a statistically significant determinant of student quality or alumni giving and others find no significant effects. Some have even found negative impacts (Tucker, 1992). Although a number of studies have investigated the effects of intercollegiate sports on student quality and enrollment, to our knowledge, only one has investigated the impact of athletic success on tuition (Mixon & Ressler, 1995). …