Monday, March 24, 2008

Eight per cent 

The latest estimate of the applications bump from winning the national title in college football or (men's) basketball is 8 per cent. A top twenty-type finish is worth 2 to 3 per cent. The systematic analysis is in a paper by Devin Pope and Jaren Pope, forthcoming in the Southern Economic Journal.

I always find the anecdotal cases in this subject area informative (I last blogged about this with regard to Rutgers football). This is from the AP story on the paper by Dena Potter, "Schools Score Big When Sports Teams Win:"
For George Mason University, just outside Washington, the positive effects of its unlikely Final Four appearance two years ago were wide-reaching.

In addition to increases in fundraising, attendance at games and other benefits, freshman applications increased 22 percent the year after the team made its magical run. The percentage of out-of-state freshmen jumped from 17 percent to 25 percent, and admissions inquiries rose 350 percent, said Robert Baker, director of George Mason's Center for Sport Management who conducted a study called "The Business of Being Cinderella."

Baker also found that SAT scores went up by 25 points in the freshman class, and retention rates as freshmen moved into their sophomore year increased more than 2 percentage points.

"You will certainly have critics who say it would have happened anyway, but I think the general consensus is that it happened faster because of this and that it allowed this university to reach new heights more quickly," Baker said.

Gonzaga was virtually unknown in most parts of the country until it broke into the national tournament in the mid-'90s. The Zags have been in the tournament every year since 1999, and during that time enrollment has grown from just over 4,500 to nearly 7,000, said Dale Goodwin, a university spokesman.

Inquiries have jumped from about 20,000 per year to 50,000, and the Spokane, Wash., school attracts students from eastern states where it doesn't recruit.

"There's no other way they would have heard about Gonzaga," Goodwin said.

The study found that private schools saw even larger increases than public universities.
Potter wrongly states that the evidence was "mostly anecdotal" prior to Pope and Pope, who make no such claim, but that's par for the course I guess. Potter is right to emphasize that the applications boost is temporary (absent any additional investment to capitalize on the increased awareness). Once on the NCAA treadmill, always on the treadmill. Unless you are Chicago.

For the record, here is the abstract from Pope and Pope's paper:
Many analysts question the role of college sports within higher education. However, one hypothesized benefit of high-profile college sports is that they can influence college choice decisions. Empirical studies that have analyzed the impact of a school’s athletic success on the quantity of student applications and the average quality of those students have produced mixed results. This study uses two unique datasets to shed additional light on the indirect benefits that sports success provides to NCAA Division I schools. Key findings include: (i) football and basketball success significantly increase the quantity of applications to a school, with estimates ranging from 2-8% for the top 20 football schools and the top 16 basketball schools each year; (ii) the extra applications received are composed of both low and high SAT scoring students, thus providing potential for schools to improve their admission outcomes, and (iii) schools exploit these increases in applications by increasing both the number and the quality of incoming students.
Update: The link to the Pope and Pope paper has been changed to a more recent version.

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Thursday, October 18, 2007

Why Study Sports Economics? 

I am a bit late to the party on this. About two weeks ago, Justin Wolfers wrote his thoughts on why people study sports economics. Summarizing Wolfers' key points:

  1. Sports provide unique opportunities to test economic theories.
  2. Sports shapes broader national debates.
  3. Professional sports are an important part of the economy.
  4. Sports participation is an important activity.
  5. Sports provides a useful teaching metaphor.
  6. Doing research on sports is fun.

JC Bradbury at Sabernomics adds one of the primary reasons to study sports:

I agree with all of these, but I think he is missing one. Sports markets are themselves unique and interesting. For example, Simon Rottenberg’s curiosity about baseball’s reserve clause—how it affected the allocation of talent across a league—led him to discover (nearly) the Coase Theorem before Ronald Coase. Mohamed El-Hodiri and James Quirk were the first model the unique structure economic structure of sports leagues, which I think economists still do not fully understand. (There are other examples, but I am on my way to a meeting.)

Add to that Walter Neale's 1964 QJE paper on the "peculiar" economics of sports. Neale noted that the best position for a typical firm to have is monopoly. In sports, a monopoly spells disaster (who will you play????). That peculiarity is interesting to think about and study.

Sports leagues are interesting per-se because they are, essentially, cooperative arrangements that blend single-entity styled cooperation with cartel-styled cooperation with a dash of economies-of-scale cooperation (for example, having the league handle team websites, as in MLB, to standardize their development and to avoid duplicating costs). These cooperative arrangements are also interesting to think about and study.

The labor market for talent is also interesting. Modeling the market as a competitive labor market gives us some insights on wages using a simple and familiar model, but it has its shortcomings. One of the shortcomings deals with the question of "does all the available talent play in the league?" In leagues such as the Bundseliga or the English Premier League, as I understand them, a lot of top-notch talent plays in other national leagues throughout the world. In that sport's labor market, there are many teams competing for that talent and there are many top-notch players, so the competitive market model is at least a plausible way to think about labor market for soccer.

But what of leagues like the NFL? There are no other similar leagues anywhere in the world that play this game at this level. It is accurate to assume that all the best available football talent plays in the NFL and if a team wants to sign additional players, it must lure them from other teams in the league. That raises some interesting questions on competitive balance, among other issues.

So why study sports? Wolfers makes valid and useful points, but his list is incomplete. Many of us study sports because they are simply interesting.

Dave Berri has some thoughts here.

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