The field of sports economics has grown dramatically over the past few years. Unfortunately, much of this research (being published in academic journals and/or presented at academic conferences) is often not accessible to non-academics. To help remedy this issue, the Wages of Wins Journal has elicited the help of Jill Harris. Jill earned her Ph.D. in economics from Oklahoma State University. She has taught Principles of Microeconomic theory, Economics of Sport and Economics of Crime for more than 20 years in public and private institutions and is currently teaching at Pitzer College and Pomona College. Her research interests include cheating in the NCAA, detecting the Hot-Hand in sports (especially water polo), and non-compliance behavior in organizations and industry.
Parker Brothers got it wrong; the board game should be “Oligopoly”. Instead of Park Avenue think NCAA Way. Those valuable Utilities you liked to own? Now they are rights to lucrative televised bowl games. And just when you thought you were going to build two more hotels on Stadium Street — Doh! — a Chance card commands “Go Directly to Jail….”
Sports Illustrated’s 5 part story on Oklahoma State University’s rampant pay-for-play scheme is the most recent saga of predictable cheating behavior from an incidental cartel. Standard microeconomic theory describes the inherent instability of cartel agreements to restrict output. Each member of a cartel has an incentive to cheat by breaking the quota and producing more output to earn higher profits. You may be thinking “this applies to groups like OPEC, but not the NCAA, right?” Many economists assert precisely this notion. Scholars Humphreys and Ruseski convey as much in their paper on Whistle-blowing behavior, and Brown and Jewell write about the exorbitant economic “rents” earned on student-athlete performances yet pocketed by the sports programs themselves.
Running behind the scenes of sordid details in the SI story and many other headlines (Johnny Manziel’s autograph?) is a river of doubt about what it means to be an amateur athlete in the multi-million dollar business of college athletics. Most economists argue student-athletes should be paid for their labor. Indeed, at the FBS level in college football, no one imagines these players are motivated solely by the love of the game or the passionate pursuit of an amateur legacy. In fact, the SI story (although based primarily on anecdotal evidence) confirms what I argue in this working paper: if athletes cannot be paid legally, an “illegal” market will arise where athletes in effect demand illicit payments and schools willingly supply them.
What will happen in a world where student athletes are paid for their unique talents and productivity? We will all know soon enough. With the O’Bannon case and the Cowboys’ fumble, we are closer than ever to a strange new world of reduced cartel power in the NCAA. Look for a new edition of that timeless board game where NCAA Way is renamed Manziel Manor.