The NCAA Athletics Arms Race: Theory and Evidence

Adam Hoffer, Brad Humphreys, Donald Lacombe and Jane Ruseski
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Donald Lacombe: West Virginia University

No 14-29, Working Papers from Department of Economics, West Virginia University

Abstract: We develop and empirically test a model of intercollegiate athletic department expenditure decisions. The model extends general dynamic models of nonprice competition and includes the idea that nonprofit athletic departments may simply set expenditure equal to revenues. Own and rival prestige is included in the athletic departments' utility function, generating rivalrous interaction. The model predicts that current own and rival investment has multiperiod effects on prestige since investment is durable. We test the model using data from NCAA Division I athletic programs from 2006-2011; the models incorporate spatial autocorrelation that capture dynamic rivalrous interaction. Results support the prediction of both models - NCAA Division I athletic programs appear to engage in dynamic non-price competition in terms of expenditure and spend all revenues generated.

Keywords: NCAA; dynamic nonprice competition; revenue theory of costs; athletic arms race (search for similar items in EconPapers)
JEL-codes: L83 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2014-09
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Citations: View citations in EconPapers (2)

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