Literature Review #4

Markets: Cartel Behavior and Amateurism in College Sports

Lawrence M. Kahn

MLA Citation:



Kahn, Lawrence M. "Markets: Cartel Behavior and Amateurism in College Sports."Latest TOC RSS. American Economic Association, Winter 2007. Web. 13 Oct. 2013.


Summary:


This scholarly study examines the business habits of the NCAA and cross-analyzes it with the behavior and theory of cartels. In the economic analysis, author Lawrence M. Kahn discusses the decisions made by the NCAA and how those decisions effect overall revenue. He concludes that restricting payment to the players while preserving amateurism and generating revenue is evidence of cartel behavior. He also discusses the racial disparity in regards to where the money is going. In other words, the average athlete who is predominantly African-American is not getting paid while the predominantly white NCAA executive is taking in large revenues.


About the Author:


Lawrence M. Kahn is a Professor of Labor Economics and Collective Bargaining at Cornell University. He is also a Specialized Co-Editor of Economic Inquiry in the field of sports economics.


Key Terms:


Under-the-Table Payment- refers to the compensation many college athletes receive secretly and illegally from perspective talent agents.


Monopsony- a market situation in which there is only one buyer


Quotations:


"Evidence that the best college athletes are paid below a competitive level of compensation is based in part on estimates of the marginal revenue product of these players" (Kahn 211).


"Of course, going to college may have smaller benefits for those who don’t graduate, and low graduation rates in big-time athletic programs have received considerable publicity" (Kahn 213).


"Football and men’s basketball are by far the most lucrative sports, raising $12.97 million and $4.25 million, respectively, in revenue per Division I-A school in 2003, or about 59 percent of total revenues" (Fulks, 2005a, pp. 30, 48).


Value:


This is the first economic review I have looked at. It provides a supplement to the conclusions of the author in the form of economic analysis and numbers. This comes in handy because the motivations behind the behavior of the NCAA are largely because of the economic value of their decisions. This article is in support of student athlete compensation, and could be used in the counterargument against amateurism.