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Review of Industrial Organization
Published in: Review of Industrial Organization 2/2018

27-11-2017

Rent Sharing and the Compensation of Head Coaches in Power Five College Football

Authors: Michael A. Leeds, Eva Marikova Leeds, Aaron Harris

Published in: Review of Industrial Organization | Issue 2/2018

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Abstract

The monopoly and monopsony power of intercollegiate sports create significant rents, but previous studies of intercollegiate football coaches’ salaries implicitly assume that coaches are paid their marginal revenue products. In a two-stage estimation, we show that coaches share in these rents. The first stage shows that several common measures of coaches’ productivity do not affect an athletic department’s variable revenue. When we include these measures in the second-stage salary equation, their impact on pay reflects bargaining power, not productivity. We also find that several measures of fixed revenue, which are independent of the coach’s performance, increase the coach’s pay.
previous article Modeling Competitive Imbalance and Self-Regulation in College Sports
next article State of Play: How Do College Football Programs Compete for Student Athletes?

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Footnotes
1
Earlier versions of the BCS—the Bowl Coalition and the Bowl Alliance—existed from 1992 through 1997, but they were not able to secure the participation of the Big 10 or Pac-10 conferences.
 
2
This could also be applied to a school that maximizes prestige or a more complex utility function, as long as wins enter positively.
 
3
We also specified a model that used the team’s record in the current season, but this variable had no significant impact in any of the regressions we ran and is not included here.
 
4
The University of Oklahoma and the University of Texas have higher broadcast revenue because these two schools have their own sports networks.
 
5
The BCS Bowls were renamed “New Year’s Six” Bowls after the implementation of the College Football Playoff in 2015. Because the term applies to so much of our sample, we continue to use this now-outdated phrase.
 
6
For a more complete treatment of the history of the BCS, see Leeds et al. (2018).
 
7
According to Wetzel et al. (2010), the University of Florida had net revenue of only $47,000 from participating in the 2009 national championship game.
 
Literature
Berri, D. J., Leeds, M. A., & von Allmen, P. (2015). Salary determination in the presence of fixed revenues. International Journal of Sport Finance, 10(1), 5–25.
Borland, J., & MacDonald R. (2003). Demand for sport. Oxford Review of Economic Policy, 19(4), 478–502.CrossRef
Brown, R. W. (1993). An estimate of the rent generated by a premium college football player. Economic Inquiry, 31(4), 671–684.CrossRef
Brown, R. W., & Jewell, R. T. (2004). Measuring marginal revenue product in college athletics: Updated estimates. In J. Fizel & R. Fort (Eds.), Economics of college sports. Westport, CT: Praeger Publishers.
Clotfelter, C. T. (2011). Big-time sports in American universities. Cambridge: Cambridge University Press.CrossRef
Colbert, G. J., & Woodrow Eckard, E. (2015). Do colleges get what they pay for? Evidence on football coach pay and team performance. Journal of Sports Economics, 16(4), 335–352.CrossRef
Fleisher, A. A., Goff, B. L., & Tollison, R. D. (1992). The National Collegiate Athletic Association: A study in cartel behavior. Chicago: University of Chicago Press.
Grant, R. R., Leadley, J. C., & Zygmont, Z. X. (2013). Just win baby? Determinants of NCAA football bowl subdivision coaching compensation. International Journal of Sport Finance, 8(1), 61–74.
Halvorsen, R., & Palmquist, R. (1980). The interpretation of dummy variables in semilogarithmic equations. The American Economic Review, 70(3), 474–475.
Krautmann, A. (1999). What’s wrong with Scully-estimates of a player’s marginal revenue product? Economic Inquiry, 37(2), 369–381.CrossRef
Lane, E., Nagel, J., & Netz, J. S. (2014). Alternative approaches to measuring MRP: Are all men’s college basketball players exploited? Journal of Sports Economics, 14(3), 237–262.CrossRef
Leeds, M. A., von Allmen, P., & Matheson, V. (2018). The economics of sports, Boston: Pearson (Forthcoming).
Nocera, J., & Strauss B. (2016). Indentured: The Inside story of the rebellion against the NCAA. New York: Penguin.
Wetzel, D., Peter, J., & Passan, J. (2010). Death to the BCS. New York: Gotham Books.
Metadata
Title
Rent Sharing and the Compensation of Head Coaches in Power Five College Football
Authors
Michael A. Leeds
Eva Marikova Leeds
Aaron Harris
Publication date
27-11-2017
Publisher
Springer US
Published in
Review of Industrial Organization / Issue 2/2018
Print ISSN: 0889-938X
Electronic ISSN: 1573-7160
DOI
https://doi.org/10.1007/s11151-017-9604-x

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