Economic-based paper weighing the debate for paying student athletes

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Weighing
the
Case
for
Paying
College
Athletes
Chase
Crean
Fairfield
University
Spring
2017

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The growth in popularity of sports in the United States, along with the steady increase in
four-year college enrollments and the accessibility to immediate media consumption, has led to a
near tripling of the revenues generated by college sports teams in the U.S. since 2003. Of 3,026
accredited four-year colleges in the United States, 2,075 of these institutions report having
revenue generating varsity athletics programs. Among these programs, there are 564,355
participating student-athletes coached by 26,398 head coaches and 54,171 assistant coaches.
With such prevalent participation in college sports, and an appropriately sized fan base to follow,
the revenues generated by these varsity programs came out to be a whopping $12,610,317,001 in
2015 alone, with the median head coach earning a salary of $363,302. (All numbers from 2015
consensus provided by EADA) Although these are huge numbers generated by the overall
collegiate varsity athletics programs, the distributions of these revenues are highly uneven.
Football and men’s basketball programs account for nearly 62% of that $12 billion+ just
mentioned, with the head coaches being among some of the highest paid in the country. The
University of Alabama football program generated $103.8 million in 2015; with head coach Nick
Saban to be paid $6.93 million in 2017. The University of Kentucky men’s basketball team
generated $27.2 million in 2015; with head coach John Calipari to be paid $6.58 million in 2017.
(EADA) As the overwhelming participation, revenues, and salaries within collegiate athletics
continues to increase, the debate surrounding whether or not to pay college athletes is becoming
more and more pressing.
With nearly 62% of the total revenues generated by collegiate athletics coming from just
two sports, it is important to understand the gravity of football and men’s basketball in the
collegiate sports world. Member institutions of the NCAA’s Football Bowl Subdivision are
nationally recognized as being among the top competitors in collegiate football. Schools within

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the FBS are members of one of the 10 conferences compromised within the FBS, and are widely
known to be the top revenue earners in collegiate sports, mainly through their football programs.
FBS schools own some of the biggest football stadiums in the country and showcase the most
talented players among the college level. According to the Department of Education, the 127
schools within the FBS in 2015 generated $6.39 billion worth of revenue—about half of the total
revenues generated by all college athletics departments combined. Much of this revenue is
generated during the playoffs and bowl games, which are independently operated outside of the
NCAA and, therefore, the NCAA does not enjoy those revenues. (NCAA) However, the Football
Bowl Subdivision gate and media revenues during the regular seasons do generate a pretty penny
for the NCAA.
The NCAA’s largest revenue generator is the annual Men’s Basketball Tournament,
commonly referred to as “March Madness.” The tournament consists of 68 of the top basketball
teams of each season in an elimination style tournament. Like the FBS, the NCAA generates
most of its revenues from media deals it has secured. In 2006, the NCAA signed a $10.8 billion
contract with CBS and Time Warner granting them exclusive broadcasting rights of the
tournament through 2024. (CBSNews) The NCAA brought in $797.9 million from television and
marketing rights and $123.5 million in gate revenues during the 2015-2016 basketball season.
(NCAA) To be clear, the money earned by the NCAA is distributed back out to its member
institutions in the form of scholarships, shared revenue payments among the schools in each
participating conference, and other funds that benefit member institutions. (NCAA)
Although a simple Google search would load hundreds of articles speaking about whether
or not to pay college athletes, there are many things to consider beyond what one can fit into a
brief media article. Recalling the role of the NCAA in collegiate sports; the value of a player

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perceived by a particular team; the potential impacts that paying athletes have on academics; the
costs and benefits of being a student athlete; and the costs and benefits of having a good athletics
program are all essential considerations when approaching this topic. Knowledge of economic
principles such as the monopsonistic labor market that exists in North American sports leagues,
as well as the principle of marginal revenue product, is essential in order to immerse ourselves in
a more scholarly discussion.
It should also be noted that most college athletes are currently compensated for their
participation in collegiate sports through scholarships. Scholarships vary in value, with most
being just supplements of the total cost of tuition at their respective school, while other high
profile and elite players will receive full Grant-In-Aid (GIA), otherwise known as a “full ride.”
The NCAA limits the amount of scholarships that schools can offer—for reasons that I will
discuss later—based on each sport. According to the NCAA, men’s division 1 basketball
programs can grant 13 scholarships per season; 18 for men’s hockey; 14 for women’s soccer;
and 12 for softball, to name a few. Furthermore, as of a 2012 legislation, the NCAA now permits
schools to offer multiyear scholarships to its athletes if they desire to do so. (NCAA) Such a case
illuminates the continuous efforts to better compensate student-athletes since the time of the first
athletic scholarship offered by Penn State in 1900. (Leeds 390) It should also be noted that
scholarship and GIA costs account for 14% of the average athletic programs expenditures at
NCAA member institutions. (Clotfelter) As most student-athletes currently receive scholarship
as a form of payment, this is not a question of whether they should or should not be paid, but
rather a question of how much they should be paid beyond what they are already receiving
through scholarship.

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Understanding the basics of a monopsony labor market is essential to this debate. The
labor markets that exist within major professional North American sports leagues are
monopsonistic. Similarly, the labor market of collegiate athletics imposes monopsonistic power
over players. A monopsony exists similar to a monopoly, but rather than being the sole seller of a
good or service, a monopsony is the sole buyer. A monopsonist in a labor market is therefore
able to maximize profits by keeping its costs for labor—that is, costs for athletes—lower than
they otherwise would be in a competitive labor market. A worker in a competitive labor market
is typically going to receive a wage that is reflected by the perceived value of that worker to the
firm, however this is not the case in a monopsony labor market. (See Figure 1) We refer to this
suppressed wage as monopsonistic exploitation, and in order to accurately measure the degree of
monopsonistic exploitation that is occurring, we must utilize another economic principle called
Marginal Revenue Product.
Marginal Revenue Product (MRP) is an economic measurement of the perceived value of
a worker to a firm. The general principle of MRP is the additional revenue enjoyed by a firm by
hiring an additional worker. For example, Firm X generates $20 of revenue from each unit
produced. If Firm X hires Jack and Jack is able to produce 5 units, the additional revenue
enjoyed by Firm X by hiring Jack is equal to $100. Therefore, Jacks MRP would be equal to
$100. In a competitive labor market, Jack is going to receive a fair wage based off of his
perceived MRP where the firm is able to still earn a profit but Jack is also satisfied with his
wage. In a monopsony labor market, a firm is going to utilize its monopsony power to suppress a
worker’s wage significantly lower than their MRP and, thus, maximize profits through
decreasing labor costs. It is important to note that I use the word “perceived” when discussing
the value of a worker to a firm because arriving at an exact MRP for a worker is nearly

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impossible, as there are so many variables that go into a human’s ability to bring value to a firm,
some being relatively intangible. This is especially true when measuring MRP for athletes, as
there exists such a spectrum of stats that control for a player’s performance among other
intangible inputs like leadership and team chemistry contributions. With the basics of a
monopsony labor market and MRP, the foundation of this debate lies in analyzing and evaluating
the monopsony power of the NCAA along with the MRP’s of the athletes that play within the
NCAA’s oversight.
The National Collegiate Athletic Association was founded in 1906 as a regulatory agency
over collegiate football. Today, the NCAA has about 1,200 member institutions and oversees all
sports programs within those institutions. (NCAA) Despite the agency claiming to be dedicated
to the wellbeing of student-athletes, the motive behind some of the NCAA’s actions and
regulations are not always so clear. With many member institutions competing against one
another on the field, there exists a high incentive to cheat through unfair recruiting methods or
playing ineligible athletes. Before the NCAA, and perhaps even since the NCAA’s enactment,
schools would unfairly incentivize players to join their school through utilizing a number of
different tactics such as paying players outright with cash under the table or offering academic
incentives. Schools were also conflicted because they needed to enforce academic standards
while still wanting to win games, so it was common for schools to play students who were failing
their classes. (Leeds 381) In order to ensure that schools refrain from a classic prisoner’s
dilemma situation, the NCAA acts as a cartel in that it controls the marketplace by imposing
penalties on its member institutions in the event that they cheat and unfairly recruit players. (See
Figure 2 for Prisoners Dilemma Explanation) Penalties come in several forms and are imposed
according to the violation committed by a school—A decrease in the amount of scholarships a

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school can grant to its athletes, a decrease in broadcast coverage, playoff lockouts and, in rare
but significant circumstances, the “death penalty.” The death penalty is a temporary termination
of an athletic program over some number of seasons. With the NCAA’s ability to threaten its
members with these penalties, the NCAA derives monopsony power from its role as a cartel. The
NCAA also enforces penalties in the event that a student-athlete transfers from a one-member
institution to another while having previously signed a written commitment letter to the former
school. In such an event, the NCAA prohibits play for one season, causing the student-athlete to
also forego a year of eligibility. (Leeds 386) The purpose of such of rule is to establish
monopsony power over student-athletes by preventing them from entering into an open market
and selling their talents to the highest bidding school, that is, the school that will offer them the
most scholarship money or Cost of Attendance Money.
As the NCAA can be seen as a monopsonist—the sole buyer in an open market—in the
sense that it’s member institutions are the sole buyers of the services of college athletes, we must
determine the degree to which student-athletes are or are not being monopolistically exploited by
measuring student-athletes MRP. There are a few ways to which we can measure the perceived
value of a college athlete to a team. We can account for a player’s stats such as touchdowns
scored, catches, yards, yards after the catch, drops, etc. for a receiver in football or goals scored,
assists, play time, shots on goal, shots off goal, completed passes percentage etc. for a forward in
soccer. Measuring tangible statistics such as these and correcting for them against the amount of
team wins over the course of a season is relatively simple. By running a regression analysis in
Excel, we would be able to determine an estimate of how many wins a single player contributes
to a team throughout a season. By multiplying the revenue a team generates off of one win by the
amount of wins a player generates, we would get an estimate of his or her MRP. However,

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measuring MRP in this way fails to consider some important things. As discussed earlier, it is
nearly impossible to account for all of one athlete’s revenue generating variables due to the
number of statistical categories that exist in sports. Although we are able to produce an MRP
measurement that is likely to be close to the true value, we will never arrive at an actual MRP for
a player. This approach also fails to consider intangible variables such as leadership and an
athlete’s impact on team chemistry, variables that would certainly affect the overall value of an
athlete to a team. Despite this, the MRP measurement that we would arrive at is sufficient
enough to compare to the wage a college athlete is receiving in order to determine the degree of
monopsonistic exploitation that is occurring. As a general rule of thumb, if a player’s MRP is
significantly lower than the wage they are receiving, monopsonistic exploitation exists. If a
player’s MRP is around or exceeding the wage they are receiving, there is a fair wage being paid
out and perhaps the athlete is even being overpaid. As college athletes do not receive a wage in
the form of usable currency, but rather in the form of a scholarship, it is more appropriate to refer
to the monopsonistic exploitation that colleges enjoy as economic rent. By suppressing the
compensation that colleges pay to athletes, they are able to generate a significant amount of
economic rent from their players—economic rent being the difference between a player’s MRP
and the amount of scholarship they are being compensated with. (Leeds 391)
As it is unrealistic that anyone would be willing, or even able, to measure the individual
MRP’s for all 564,355 student-athletes in varsity college sports, our next best alternative is to
understand the cash flows of revenues and expenditures in collegiate athletic departments.
Although it may be hard to believe, most college athletic departments in the United States do not
operate at a surplus. In fact, nearly every NCAA Division I athletic department in the country
receives some sort of subsidy through the school, with just 23 universities generating enough

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revenue to cover the cost of their expenditures in 2014. (USA Today) These subsidies are often
referred to as Allocated Payments or “transfer payments” as they typically come from other
sources of revenue within the school, such as small activity fees paid by students; government
support, especially for state schools; and/or budget transfers from other programs within the
institution. However, the intra-institutional programs making these transfer payments to the
athletics departments certainly face a financial burden that is likely to negatively affect the
mission of such programs. Despite this, most schools are willing to subsidize its athletics
departments in order for the school to cover the costs of its athletics expenditures because of the
greater benefits that successful sports programs provide to schools. I will discuss these benefits
later on.
To further explore the financials of collegiate athletics programs, I put together a small
study of my own comprised of the revenues and expenditures of four NCAA Division 1 schools,
each with different athletic characteristics. The University of Alabama—one of the most
prominent athletics schools in the country due to its hugely successful football program. The
University of Kentucky—another prominent athletics school with a decent football program, but
most known for its men’s basketball program. The University of Virginia—a decent contender to
make it deep into the men’s basketball March Madness tournament, but more known to be a
well-rounded athletics school with championship contention almost every year in baseball and
men’s and women’s lacrosse, soccer, and tennis programs. And lastly, my future Alma Mater
Fairfield University—a small liberal arts school with a significantly smaller student population
and no specific athletics team considered to be the “main sport” on campus. It is important to
note that Alabama, Kentucky and UVA are schools within the Football Bowl Subdivision.

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The purpose of drawing data from these characteristically different schools is to compare
financials across the spectrum of athletics programs. Working from the top of the columns down,
expenditures are comprised of the costs of athletic scholarships; recruiting expenses—the costs
of exploring for prospective high school athletes; operating expenses—the costs of operating on
game days; and general expenses such as equipment, coaches’ salaries, training etc. Revenues
are generated from media and marketing deals, gate revenue, and merchandise sales. Referring to
Figure 3, the University of Alabama is the only school to generate revenues that exceed
expenditures. As one the most dominant schools out of the 128 currently in the FBS, Alabama
takes in a surplus of just $5.5 million from revenues of $165.8 million. As Alabama is the only
school in my data set that generates a surplus, UVA operates at a deficit of 41.2% of revenues;
Kentucky at 18.4% of revenues; and Fairfield, running the largest percentage deficit, at 46.4% of
revenues. I included Alabama in this set to show that, despite being the home to one of the most
successful collegiate football programs in the country, it just barely generates a surplus of a mere
3.3% of revenues. With this, both Kentucky and UVA’s athletic departments operate at large
deficits, UVA being more significant, despite the prominent athletics presence and success at
both schools. Fairfield, having clearly less significant financial cash flows due to a lower student
population, operates at the most significant deficit relative to its revenues. This is largely due to
the lack of a major sports team and a lack of membership to one of the countries more high-
profile sports conferences.
As almost all college athletic departments do not operate at a surplus, including
institutions that house some of the most high-profile football and men’s basketball programs in
the country, we are able to better understand the degree of monopsonistic exploitation that is
occurring in college athletics. Although the average NCAA Division 1 College athletics

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department generates multi-million-dollar revenues, their expenses, including the cost of
scholarships that are paid to their athletes, are much greater. With this, some may say that it is
unlikely that student-athletes are being exploited for their services because the teams they play
for are not generating surpluses as it is. This is most likely the case for small, lower profile
athletics programs within most institutions. As an example, all sports programs that comprise the
athletic departments at each of the four universities used in my data in Figure 3, excluding
football and men’s basketball, operated at a deficit for both women’s and men’s sports. The most
significant of these deficits existed at Kentucky, with expenses being $11.1 million and revenues
being just $836,942 for all men’s sports programs excluding football and men’s basketball.
Contrarily, the football and men’s basketball programs at Alabama, Kentucky and UVA all
reported revenues that significantly exceeded expenses. Fairfield does not have a football
program, and its men’s basketball program posted revenues that perfectly met expenses. As
football and men’s basketball programs are the most revenue generating sports programs in all of
collegiate sports, it is likely that this significant deficit is the case for all other sports programs at
most institutions throughout the country. In such a case, it can be concluded that the reason that
nearly all NCAA institutions throughout the country report net deficits is because collegiate
athletic departments choose to field several other sports teams besides football and men’s
basketball—sports teams that rarely generate surpluses.
As I said earlier, it is unlikely that anyone would have the tools to get an accurate
measure of each individual athletes MRP in order to determine whether we should pay all
athletes or simply the ones whose MRP is high enough to justify payment beyond what they are
already receiving through GIA. By examining the financial shortfalls of most collegiate athletics
programs, excluding football and men’s basketball, we are able to determine that it is likely that

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most student-athletes playing low profile sports such as tennis, rowing, fencing, field hockey,
softball, volleyball, swimming, track and field, etc. are not worthy of receiving payment beyond
scholarship simply because they are on teams that operate at deficits even without additional
payment to their athletes. However, on the other hand, when examining the financial structures
of the high-profile NCAA Division 1 football and men’s basketball teams, there is surely enough
revenue being generated to pay athletes beyond their scholarships. With the head coaches
earning paychecks proportional to the revenues the team is earning, along with the media
revenue the NCAA earns and distributes among successful athletic conferences and the high-
profile nature of some of the most elite college football and men’s basketball players, it is no
wonder that this debate is as pressing as it is.
Although old, a study conducted by Robert Brown in 1993 titled An Estimate of the Rent
Generated by a Premium College Football Player measures the estimated MRP of the most elite
college athletes in a timeless fashion. Although the numbers would be much different today, the
principle still remains the same. Brown figured that a player who was good enough to be
considered for the NFL generated between $539,000 and $646,000 of revenue per season for
their school. That is over $2 million in revenue over the course of a four-year college career,
assuming the player did not enter into the draft earlier. While the player generated these
estimated revenues, they were only being paid the value of their scholarship—the average cost of
tuition for four-year schools today is around $25,000, however it would have been significantly
less back then. (NCES) With this study, along with the illumination of the surpluses generated by
the nation’s most high profile collegiate athletics programs, it is shown that many student-
athletes playing for these high-profile teams are being monopsonistically exploited in a huge
way.

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With such premium athletes being the subjects of exploitation, one may seek to determine
the true value of a free college education. Many would argue that on top of a player earning
something valued around $25,000 per year, compensation in the form of a scholarship is not a
liquid asset. Although athletes are provided a hugely supplemented college degree, assuming
they remain at the college for all four years, this compensation still does not solve the financial
burdens one is likely to face while attending college. With this, the illiquid nature of a
scholarship provides no immediate benefits to a student-athlete, while the costs of playing a
college sport are incurred immediately.
As we have finally arrived at the degree of monopsonistic exploitation that exists with the
most elite athletes in college sports, we must consider a few more things in order to have
considered all aspects of the argument that student-athletes should be paid according to their
MRP. Although it is likely that most other student-athletes outside of football and men’s
basketball are not worthy of pay beyond what they receive in scholarship, it does not seem like a
realistic feat to pay only a small percentage of student-athletes throughout the country. There
would surely arise Title IX implications, as well as impacts to academics; team chemistry;
competitive balance within collegiate sports leagues; and quality of play in major professional
sports leagues. Furthermore, despite even the most elite players who have the potential of going
pro being deserving of pay-for-play, their amateur and student status may actually justify the
large degree that they are being monopsonistically exploited.
Title IX is a piece of United States legislation that holds that “No person in the United
States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or
be subjected to discrimination under any educational program or activity receiving federal
financial assistance.” This applies to college sports in the sense that all athletic opportunities and

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expenditures need to be equal between all NCAA men’s and women’s sports programs within an
institution. (Leeds 351) If we were to only pay student-athletes whose MRP was able to justify
payment beyond scholarships—that is, football and men’s basketball players—Title IX holds
that institutions would have to make the same amount of available to its women’s sport teams
that it will pay to the men playing football and basketball. Although these opportunities may not
come in the form of direct cash payments, institutions would still have to sink an equivalent
amount of money into some athletic aspect that would benefit women athletes—this could come
in the form of better equipment, more scholarships, or better training facilities or coaches. If my
interpretation of Title IX is correct, the result of such a case would essentially be a zero-sum
game, as the proportion of expenditures on men’s and women’s programs would have to remain
the same in the case that we paid only those men playing football and men’s basketball.
As there are currently scholarship limits imposed by the NCAA on its member
institutions, the situation of one player receiving more “payment” over their teammate already
exists. However, if we were to introduce payments beyond scholarships, the appeal of cash
would be introduced to the situation. Because cash is typically a lot more valuable to a person
than the dollar amount of their scholarship, the introduction of cash payments would surely have
some effect on team chemistry. In 1991, economist David Levine developed a model that
showed that “greater wage disparity between high-skill and low-skill workers causes a
breakdown in team cohesiveness and in overall team production.” (Depken 2) Furthermore, with
the introduction of pay-for-play, it can be argued that the relationship between performance and
payment would become even more engrained in players’ strategy. Players would surely be
incentivized to enhance their own personal stats in a selfish way out perform their peers. Such an

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instance would negatively impact competitive balance, as players’ main focus would be on
themselves rather than on winning the game.
There currently exists a situation that would impose such a problem. As of 2015, an
autonomy group consisting of the Atlantic Coast, Big Ten, Big 12, Pac-12 and Southeastern
conferences, as well as Notre Dame, decided that schools within these football-powerhouse
conferences should now be able to offer cash payment on top of scholarships to athletes they
deem deserving of such a payment. The payment is called a “Cost of Attendance” and is
intended to cover the “full cost” of college tuition, which includes food, travel and any other
expenses that may arise from a student-athlete attending and playing in college—expenses that
even a full GIA do not cover. The COA payment can vary, but is maxed out at $5,000 on top of a
player’s scholarship. (NCAA) With such a payment, and an institutions ability to award COA
payments at their own discretion, discouragement among players arising from wage disparities
may significantly harm team chemistry. It can be argued that the COA payment may certainly
have an effect on competitive balance among collegiate football as well, as the payment allows
schools to offer an additional incentive on top of a scholarship to get the best talent to attend
their school. However, this argument may not hold as much water as one would initially think.
As the schools within these five conferences that have all agreed to offer these COA payments
are typically the schools that dominate collegiate football, it is likely that they do not need to
offer an additional incentive in order to recruit the top talent to their schools.
If we decided to begin paying student-athletes a more liquid payment on top of
scholarships, there would surely be effects on academics that we would have to consider. As the
purpose of high academic performance is to enhance one’s social capital in order to achieve
optimal labor market outcomes, the introduction of liquid cash payments make it easy for one to

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lose sight of the importance of academic achievement. Because student-athletes would be
receiving what they could perceive as a wage, it is likely that their drive to perform well in
academics would be displaced by the comfort they would feel with receiving a wage. This idea
lies in the general principle that the value of something is worth more at present than it is worth
at some distant point in the future. Despite the value of graduating with a solid grade point
average and a college degree having a future value of hundreds of thousands of dollars, it can be
argued that the tens of thousands of dollars a student-athlete would be receiving for playing
college athletics is more valuable because they are receiving an immediate benefit. Student-
athletes would then focus solely on their sport while they made sure that their academics were
just good enough to meet the eligibility standards of the NCAA, thus not contributing to the
overall institutions academic quality.
Very few student-athletes end up making it to the major professional leagues—that is,
NHL, MLB, NFL, NHL and MLS. However, the most elite players that are talented enough to
secure a top draft prospect are likely to leave their university earlier than the four years required
to get a degree and enter into the draft. Although there exists no incentive that would persuade
such elite players to stay at their university for all four years, the introduction of pay-for-play
would likely persuade those that are good enough to go professional but are not as elite as the top
draft prospects. In other words, pay-for-play would incentive those players with lower draft
stocks to remain in college for additional years rather than enter into the draft. For example, a
junior defensive tackle that is likely to be taken in the third or fourth round of the draft will
probably leave his university and enter the draft because he is essentially guaranteed a spot on a
professional team with a large paycheck to follow. However, if he were receiving some sort of
payment while playing at his university, he would probably stay for the additional year to finish

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his college degree because the opportunity cost of staying the additional year is significantly
reduced in the case that he is paid. If student-athletes were paid and this situation occurred more
frequently, student-athletes would consequently complete their degrees more often. Although
this does not necessarily mean that the quality of academics would rise, it does bode good news
for athletic graduation rates and increases the number of student-athletes obtaining a college
degree rather than leave early to go pro.
Such a case would also have a significant impact on the quality of play in professional
sports leagues. Referring to economist Gary Becker’s Model of Human Capital Formation shown
in Figure 4—as time goes on; a player’s MRP increases, arrives at a peak, and declines. In such
an instance that I drew out in the previous paragraph, a college athlete with a projected draft
stock in the later rounds is likely to still be on the incline of their MRP. In the event that student-
athletes are paid, such an athlete would delay their entering of the draft to stay an additional year
at the college level. During this extra year, the athlete will reap the benefits of additional
training, experience and maturation that will increase their human capital and athletic talent. This
individual increase in talent manifested over the course of an additional year at the college level
will cause an overall increase in the quality of play at the professional level, with more athletes
entering the draft at higher points in the human capital formation model.
With these costs and benefits now weighed in the event that we do pay athletes, I will
discuss the genesis of the additional revenue that would be required in the event that we do pay
athletes beyond scholarships. Before I do this, it is important to examine the costs that are
currently imposed on colleges who pay their athletes scholarships. Although scholarships are
included as part of expenditures, the true cost of scholarships to schools is unclear. In economics,
the value of a good or service is typically reflected by its opportunity cost. (Leeds 373) In other

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words, $100 spent going out to dinner means $100 that cannot be spent somewhere else, say a
baseball game. As this holds true for most goods and services, it does not for colleges granting
scholarships to student athletes. In such a case, a full GIA granted to a student athlete does not
impose the cost of foregoing a student who would have otherwise paid full tuition because it is
almost always the case that colleges are not operating at full capacity, and thus they have room to
admit one more full-paying student. So, although colleges report that an average of 14% of their
athletic budget is devoted to paying out scholarships, this shows that is it likely that athletic
scholarships actually impose a much lower cost to universities. (Siegfried) With this, we can then
start to think about where the additional finances would be drawn from if we were to pay
student-athletes.
In the case that college athletes end up being paid beyond scholarships, we would have to
consider the financial impacts that this would have on college athletic departments and where the
additional revenue to pay athletes would come from; either an increase in student tuition or an
increase in transfers from academic programs to athletic programs. An increase in student tuition
would be possible only if the economic environment was suitable. For small liberal arts schools,
an increase in tuition is risky, as schools with such a size are already highly competitive in terms
of capturing student applications. An increase in tuition may significantly decrease the amount of
applications a school receives. Therefore, the most likely route would be to increase transfer
payments. As discussed earlier, most collegiate athletics programs already do not generate
enough revenues to cover the costs of expenditures without receiving transfer payments.
However, increasing the amount schools allocate to their athletic departments may impose
significant costs to the schools non-athletic ventures. With decreased budgets for academic
programs, there would surely be a decline in the quality of academic programs such as less

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administrative support; less amenities for general students; and most significantly, fewer tenured
faculty resulting in decreased quality of professors. Currently, schools are willing to incur these
costs because they believe that the benefits of having successful athletics programs on campus
outweigh the costs of subsidizing their athletics departments through transfer payments from
non-athletic programs.
As we have examined that even some of the most successful college athletics programs
do not generate enough revenues to result in a surplus, we should examine the non-financial
benefits that successful athletics programs on college campuses provide. Both professional and
collegiate sports can be seen as a public good. In economics, a public good is non-excludable—it
is available to anyone and everyone—and non-rival in consumption—one person enjoying the
good or service does not affect another’s ability to enjoy the good or service. As college athletics
can be seen as a public good, they provide benefits to everyone on a college campus. A
prominence of college athletics enhances the sense of community that is felt on a campus. It
gives students a sense of belonging to something greater because, as fans, it makes them feel a
part of something larger than just a classroom. (Leeds 376) This sense of community derived
from school spirit can spillover to alumni and the greater community off campus. In many cases,
especially with football, this can extend throughout an entire state and even to various parts of
the country. The benefits from this public goods effect are enjoyed back on campus, as students
are likely to become more productive both in and out of the classroom. This can also rub off onto
teachers and other faculty, increasing the overall quality of life on a college campus.
Beyond these social benefits, there have been studies conducted showing the effects of
successful college sports teams on prospective high schools students’ applications. A study
conducted by Devin and Jaren Pope in 2009 found that schools whose football programs ranked

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20
in the top 10 and schools whose men’s basketball programs made it to the “Sweet 16” in the
March Madness tournament saw quantity of applications rise by about 3% in the wake of these
athletic feats. Applications also rose around 7% to 8% in the wake of a school winning a national
championship in either sport. The study concludes that increased athletic success increases both
quantity and quality of prospective students’ applications, with quality of applications being
measured by SAT scores. These findings are significant for schools as it shows that athletic
success can enhance student body composition by providing schools with the opportunity to
accept more students from an enhanced spectrum of SAT scores.
As it can be argued that the benefits of having successful athletics programs on college
campuses largely make up for the financial shortfalls of nearly every NCAA Division 1 athletics
department, the case can certainly be made that we should compensate all student-athletes in
some form or another. Division 1 football and men’s basketball players absolutely have higher
MRP’s than most other student-athletes, and therefore deserve to be paid over what the value of
their scholarship is. However, with these social benefits examined, we may be able to justify
payment to athletes who play on the teams that impose a net drain on the assets of their host
institution. If an institution were unwilling or unable to provide the resources necessary to pay
their athletes and remain compliant with Title IX, they may be forced to relegate to a lower
division in the NCAA—most likely Division III, where schools are not permitted to provide
athletic scholarships to their players. Relegation would have to occur because an institutions
inability to pay their players beyond scholarships would consequently affect their ability to
compete with schools that do pay players, thus significantly decreasing competitive balance.
Because so few high school athletes are considered good enough to receive a scholarship
to play at Division 1 institutions—about 2%--and because even fewer go on to play

21. Crean
21
professionally—1.1% to NBA; 1.5% to NFL; 0.9% to WNBA; 1.4% to men’s soccer—a college
education is one of the most rewarding benefits for student-athletes. If that education can be
provided at a largely subsidized cost, or for free, a student-athlete is receiving the benefit of a
college degree while minimizing any and all debt obligations, a benefit that many would value as
very high.
Despite conducting the research to write this paper, I do not consider myself worthy of
arriving at a definite answer of whether or not college athletes should be paid beyond what they
are already receiving through scholarship. The foundation of this argument lies in the economic
principle of monopsonistic exploitation, and whether or not student-athletes MRP’s are high
enough to justify payment. We have examined the implications of paying only those athletes
whose MRP is high enough to justify payment, while also touching on the case of paying all
student-athletes no matter if their team imposes a net drain on the assets of it’s host institution.
Considering the benefits that college sports provides beyond financials, as well as the affects on
academics, team chemistry, competitive balance, and quality of play in the professional leagues
is also important. The costs and benefits of playing college sports, as well as the benefit of
receiving a largely subsidized, if not free, college education is also important to weigh. In an era
where sports continue to grow more and more prominent, this topic becomes more pressing.
With the increase of benefits that schools are allowed to offer their student-athletes in the last
few decades, I do not doubt that the day will come when college athletes receive significant
contributions on top of their scholarships.

22. Crean
22
Appendix
Figure
1-­‐‑
Monopsony
Labor
Market
Wage
Figure
2-­‐‑
Prisoner’s
Dilemma
U-­‐‑Miami
Maintains
U-­‐‑Miami
Cheats
Florida
Maintains
Schools
Recruit
Evenly
both
have
good
reputations
U-­‐‑Miami
dominates
rivalry
but
reputation
is
tarnished
Florida
Cheats
Florida
dominates
rivalry
but
reputation
is
tarnished
Schools
Compete
Evenly
both
have
bad
reputations
ME
S
D
WC
WM
This
graph
shows
the
wages
workers
receive
in
a
monopsony
labor
market
compared
to
a
competitive
labor
market,
or
a
regular
labor
market.
There
is
your
basic
upward
sloping
supply
curve
and
downward
sloping
demand
curve,
with
the
quantity
of
labor
on
the
X-­‐‑axis
and
the
wage
on
the
Y-­‐‑
axis.
A
monopsonist
is
going
to
utilize
their
monopsony
power
to
suppress
wages
from
WC
to
WM
while
also
restricting
quantity
from
QC
to
QM.
QC
QM
QuantityLabor
This
is
a
classic
prisoner’s
dilemma
in
economics.
As
cheating
through
recruiting
players
unfairly
results
in
domination
over
the
competition,
the
incentive
for
schools
to
cheat
is
very
high.
However,
if
both
schools
cheat,
they
are
worse
off
than
if
they
both
did
not
cheat,
as
they
still
compete
evenly
but
both
schools’
reputation
is
tarnished.
As
this
was
the
case
early
on,
collegiate
athletics
needed
a
governing
regulatory
body.

23. Crean
23
Figure
3
Bama UVA Kentucky Fairfield
7,309,795 9,083,919 6,757,019 2,842,194 Mens Aid
6,607,287 7,671,644 4,987,712 3,769,693 Womens
2,227,636 1,063,765 1,394,629 71,589 Mens Recruiting
520,548 473,104 795,461 73,348 Womens
10,994,464 8,737,826 7,157,497 1,052,016 Mens Operating
4,266,085 3,395,410 3,929,867 885,101 Womens
73,530,286 42,175,191 50,317,701 6,095,326 Mens Expenses
19,627,123 17,352,493 17,706,855 6,218,622 Womens
35,259,271 45,426,381 54,496,573 6,407,831 Not Allocated
160,342,495 135,379,733 147,543,314 27,415,720 Total Expenses
120,346,396 46,244,352 67,791,013 6,095,326 Mens Revenue
8,399,922 8,962,102 1,705,113 6,218,622 Womens
37,144,196 40,638,304 55,070,746 6,407,831 Not Allocated
165,890,514 95,844,758 124,566,872 18,721,779 Total Revenue
5,548,019 -­‐39,534,975 -­‐22,976,442 -­‐8,693,941 Deficit
0.033443859
-­‐
0.412489695
-­‐
0.184450662 0.464375795 Deficit/Revenues
1.034601052 0.707969767 0.844273242 0.682884819 Revenues/Expenditures
7,222,432 3,555,151 2,479,793 N/A Football Operating
1,480,031 2,053,304 2,633,149 416,845 Basketball (Mens)
891,185 1,105,005 1,110,489 217,420
Basketball
(Womens)
2,292,001 3,129,371 2,044,555 635,171 Other (Mens)
3,374,900 2,290,405 2,819,378 667,681 Other (Womens)
56,214,376 20,333,481 22,309,964 N/A Football Expenses
8,577,428 8,644,445 18,910,412 2,590,915 Basketball (Mens)
3,550,880 4,276,182 5,349,631 1,817,467
Baksetball
(Womens)
8,738,482 13,197,265 9,097,325 3,504,411 Other (Mens)
16,076,243 13,076,311 12,357,224 4,401,155 Other (Womens)
103,870,999 27,931,475 39,714,834 N/A Football Revenues
14,446,339 10,326,281 27,239,237 2,590,915 Basketball (Mens)
987,004 1,034,129 653,435 1,817,467 Basketball(Womens)

24. Crean
24
2,029,058 7,986,596 836,942 3,504,411 Other (Mens)
7,412,918 7,927,973 1,051,678 4,401,155 Other (Womens)
63,436,808 23,888,632 24,789,757 N/A
40,434,191 4,042,843 14,925,077 N/A Surplus From Football
Figure
4
MRP
Time
Peak
MRP
Becker’s
Model
of
Human
Capital
Formation
holds
that
as
time
goes
on,
one’s
MRP
increases
until
it
maxes
out,
and
then
decreases.
In
athletics,
we
can
view
the
incline
before
peak
MRP
as
the
time
where
a
player
is
receiving
training,
as
well
as
experience
and
general
maturation
that
all
contributes
to
his
or
her
value
as
a
player.
For
the
players
worthy
of
going
pro
in
later
rounds
of
a
draft,
their
MRP
is
likely
not
near
their
peak.
By
staying
an
additional
year
in
college,
the
training
they
receive,
along
with
an
increase
in
general
experience
and
maturation,
contribute
to
their
skill
level.
Thus
when
they
enter
into
the
draft
one
or
two
years
later,
they
are
closer
to
their
peak
MRP,
increasing
the
quality
of
play
among
professional
sports
leagues.

25. Crean
25
Works
Cited
Berkowitz,
Steve.
Upton,
Jodi.
Brady,
Erik.
Most
NCAA
Division
1
Athletic
Departments
Take
Subsidies.
2013.
USA
Today.
Berr,
Jonathan.
March
Madness:
Follow
the
Money.
2015.
CBSnews.com.
Clotfelter,
Charles
T.
Big-­‐‑Time
Sports
in
American
Universities.
2011.
Depken,
Craig
A.Wage
Disparity
and
Team
Productivity:
Evidence
from
Major
League
Baseball.
1999.
Leeds,
Michael
A.
Von
Allmen,
Peter.
The
Economics
of
Sports.
2016.
Routledge.
NCAA.org
Siegfried,
John
J.
&
Sanderson,
Allen
R.
The
Case
for
Paying
College
Athletes.
2015.
Journal
of
Economic
Perspectives.
U.S.
Department
of
Education
Database.
https://ope.ed.gov/athletics/#/