1. The Economics of Sports
FIFTH EDITION
Chapter 10
Discrimination: Theory, Measurement, and Consequences
Michael A. Leeds | Peter von Allmen

2. Introduction
Jackie Robinson became the first black player in MLB’s modern era (NL; hired by manager Branch Rickie)
1946—Montreal Royals
1947—Brooklyn Dodgers
Larry Doby became the first black in the AL (hired by Bill Veeck)
1947—Cleveland Indians
It is remarkable that Robinson and Doby flourished despite the tense atmosphere in which they played

3. Learning Objectives Understand the Becker model of discrimination
Describe how various forms of discrimination can occur in professional sports
Evaluate gender discrimination in college sports

4. Empirical Studies and Definitions
A major study finds that all players face the same opportunities in MLB, NFL and NBA
Some economic studies find that there are differences in pay in the NBA as well as European soccer
They also find evidence of discrimination in the NFL draft
We need to distinguish between
Prejudice -- a feeling or emotion
Discrimination -- an action
Economists separate two issues
Equal access to work (draft order)
Equal pay for equal work (equal salaries to equally talented players in same positions)

5. 10.1 Becker’s Theory of Discrimination
Gary Becker (1957) uses neoclassical theory to analyze and evaluate discrimination like any other “good”
Neoclassical theory assumes that people maximize utility subject to constraint
Economists focus much more on the outcome of discrimination than on its origin
Becker considers prejudice a taste
Discrimination is indulging that taste
This indulgence comes at a cost
We can reduce discrimination by raising its cost

6. 10.2 Different Forms of Discrimination
This section introduces
Employer Discrimination
Employee Discrimination
Consumer Discrimination
Although each model uses money to measure the intensity of the discrimination, they are all based on utility maximization
As people with a taste for discrimination maximize their utility, their willingness to pay to indulge their tastes has a variety of effects

7. Employer Discrimination
In Becker ’s model, employers have preferences regarding employees with whom they do and do not want to associate
There have been many studies of discrimination against French-speaking hockey players (Francophones)
Their findings depend in many cases on the players’ positions
To simplify matters, assume that there are only two groups of players
English-speaking (E) and French-speaking (F)
We assume for now that, although the players’ styles may differ, they are equally productive
They have the same MPL

8. Employer Discrimination
If a hockey team owner dislikes Francophones, employing them brings a psychic cost
He feels that he pays them more than others
The perceived wage is
wF = (1+dF)wE
dF = discrimination coefficient (%)
If the employer pays both F and E the same, he feels as if he is paying F more
As a result, the demand for F falls

9. Employer Discrimination
Assume for simplicity that the supply of both players is the same
Panel b in Figure 10.1 indicates that the wages of both kinds of players will be the same
Panel a in Figure 10.1 indicates that with discrimination, the demand for Francophones falls
At any given wage, the employers’ distaste for them reduces their willingness to hire them
As a result, F’s wage falls relative to E’s
WE > WF

10. Figure 10.1

11. Who Wins and Who Loses: Summary
Francophone players lose
Pay is lower and fewer are employed (Figure10.1)
Anglophone players win
Pay is higher and more are employed
Less qualified workers are hired
Unequal pay for equal work results
Prejudiced employers lose
Francophones’ lower pay offsets psychic cost
Employers pay more for worse players

12. Statistical Discrimination
What if productivity differs across the two groups?
Group statistics may indicate nothing about individual performance
The use of group averages to judge individual productivity is called statistical discrimination
Employers may use it if obtaining individual information is costly
Small differences in group statistics can have a strong impact on a team’s hiring practices and may result in decisions that look like taste discrimination
Statistical discrimination may generate a self-fulfilling prophesy

13. Does Anyone Win with Employer Discrimination?
Consider the case of racial discrimination in MLB
Blacks were effectively barred from organized baseball from 1888 to 1947 by a “gentlemen’s agreement”
One group that benefited from discrimination was white players of that era
More white players played in the major leagues than would have been possible otherwise
Figure 10.2 reflects the result of assuming that there is a large supply of white players (deep pool of talent) willing to play at market wages—no blacks are hired

14. Figure 10.2

15. Segregation Results
The Negro League owed its existence in part to such discrimination
The league effectively folded once the major league integrated
Figures 10.3 shows the market for Negro League
Demand (DS) was much higher before integration (DI)
Figure 10.4 shows the MLB market
Demand (DI) rose after integration (DS)
Tastes of consumers changed, both blacks and whites

16. Figure 10.3

17. Figure 10.4

18. Competition Can Eliminate Discrimination
Unprejudiced employers have an advantage over prejudiced employers
They hire more productive players (and get higher revenue if consumers and employees are not prejudiced)
They do not have to pay as much as teams with Anglophones
They have higher profits
As more unprejudiced employers enter, or as more people worry about profit than taste
Pay of Francophones is driven up
Pay eventually equals those of Anglophones
Perfect competition eliminates discrimination

19. Competition and Discrimination
In the 1950s, integrated teams were better
Dodgers, Giants, Indians, Braves, and White Sox were dominant teams
Dodgers and Giants won pennants
Only the Yankees were good and remained white
Owners had recognized black talent but could not act on it
MLB kept Bill Veeck from buying the Phillies in 1943
Veeck had wanted to hire Negro League players
He was the first to integrate AL with 1947 Cleveland Indians

20. When Markets Are Not Competitive
In competitive markets, discriminated players work at a discount
We will now assume that the market for labor is not competitive—it is a monopsony
The standard model is presented in Figure 10.5
Without discrimination, the employer pays the same low wage (found on the supply curve) to all players
In this figure, the wage is $800 while the value of the player is $1000

21. Figure 10.5

22. Figure 10.6

23. Monopsony Model with Discrimination
Figure 10.6 shows the wages paid to F players
It assumes that
F players are more productive than E players, so F players are worth $1500 rather than $1000 that E players receive (for example)
Employers discriminate against F players, which shifts the demand curve from D to D’
F players are paid more than E players ($960>$800)
F players are paid less than they are worth because of monopsony power and because of discrimination

24. Employee Discrimination
Employees with a taste for discrimination regard the market wage, w, as w(1 - dj)
dj represents the coefficient of discrimination for employees
They feel like they are being paid less
In 1880s, a few blacks played in the American Association
The first was Moses Fleetwood Walker for Toledo in 1884
Cap Anson, a dominant player for Chicago White Stockings, played in an exhibition game against Toledo team with Moses Fleetwood Walker
Next year he had a contract not to include black players
White players drove blacks out of MLB by 1888

25. Employee Discrimination History
Attempts to reintegrate MLB started after WWII even as employee discrimination was rampant
The Dodgers traded 5 players for Al Gionfriddo & $100,000, a marginal player, who was willing to take the locker next to Robinson (& “carry the money”)
In 1947, Dodger players circulated a petition refusing to play with Robinson
Dodgers manager, Leo Durocher, called a late-night meeting and (in an exquisite speech of which there are different versions) said
See the next slide

26. Quote
…I hear that some of you don’t want to play with Robinson. Some of you have drawn a petition. Well, you know what you can do with that petition
I hear Dixie Walker is going to write Mr. Rickey a letter asking to be traded. Just hand him the letter, Dixie, and you’re gone! I don’t care if a fellow is yellow or black or if he has stripes like a fuckin’ zebra
I am the manager, and I say he plays. …I’ll play an elephant if he can do the job, and to make room for him I’ll send my own brother home
He’s going to win pennants for us. He’s going to put money in your pockets and money in mine

27. Discrimination in Perfect Competition
Assume the labor market is perfectly competitive
The supply curve is horizontal
Prejudiced players require a compensation above the market wage: w/(1-dj)
Such a wage does not exist
Prejudiced players are replaced by those willing to take the market wage
Alternatively, the employer could ban black players
Players no longer require a premium wage
Segregation thus results in this case from employee discrimination

28. Discrimination v. Segregation
The two are not the same – though they usually are related
There could be separate markets for prejudiced and unprejudiced players
Dixie Walker refused to play alongside Robinson
Walker was not refusing to play
He just did not want to play with Robinson
Dodgers traded Walker to the Pirates in 1948
Teams separate into integrated and non-integrated teams
Pay and treatment on those teams is not affected by race

29. A Digression into Boxing
Jack Johnson and “unforgivable blackness”
In some ways, he resembled Muhammad Ali
Times did not tolerate a brash black man who taunted his opponents
Race riots accompanied his title win and defenses (1915)
He spurred the search for a great white hope
No black man fought for the title between 1915 and 1936
Joe Louis was a supremely talented fighter
He was groomed with Jack Johnson in mind
His achievement went beyond boxing 2 bouts v. Max Schmeling
He became symbol of American ideals v. Nazism
Schmeling beat Louis in 193
The rematch in 1938 brought interracial celebration rather than riots

30. Consumer Discrimination
Consumers have a taste for discrimination if they prefer not to purchase goods or services from members of a specific group
Customers feel a psychic cost
Some fans feel they pay a higher price p(1+dk) when watching black players
p is the price of watching white players
Consumer discrimination can be difficult to isolate
A team feels pressure to discriminate
It fears that fans will go elsewhere
Unprejudiced employers are led to discriminate

31. Consumer Discrimination
Consumer discrimination can affect attendance
Consumers could show their taste for discrimination by supporting teams that have fewer players from the group that they dislike
Consumers could follow teams that are integrated but do so with less intensity—going to fewer games, buying fewer jerseys, watching the team less on television

32. Detecting Consumer Discrimination
Studying consumer behavior can be difficult
It is not obvious how to separate taste for the team from the taste for individual players
Several studies focus on memorabilia rather than game attendance
Do fans prefer the cards of white players, all else equal?
Evidence suggests they do

33. Measuring Discrimination
In 1988 Kahn & Scherer asked:
Is there racial discrimination in the NBA?
How can there be when the NBA is 80% Black?
Black players earn more than white ones on average
The theory of discrimination says that
Average pay is suggestive but not conclusive
Discrimination means paying equals unequally
Compare black players with otherwise identical whites
Kahn and Scherer found that black players received about 20% less than white players

34. Discrimination by National Origin; UEFA
Civil rights legislation outlaws discrimination on the basis of “race, color, religion, sex, or national origin”
Union of European Football Associations (UEFA) is the governing body for European Football/Soccer
Collectively, UEFA feared loss of national identity on club teams if clubs use too many foreigners
Individual teams tried to hire many foreign players to improve
Until 1991 UEFA allowed each team to have only 2 foreign players
This limitation was struck down by European Union

35. UFEA
Because the EU (Treaty of Rome…) allows free movement of labor, teams had to adjust
3 + 2 Rule limited each team to three starting players from other countries in 1991
It, too, was struck down—by the “Bosman Ruling”
Jean-Marc Bosman tried to move from Liege (a team in the Belgian League) to Dunkerque (France); he was blocked and appealed to the European Court of Justice
UEFA’s current regulation requires “eight players from every 25-man squad to have been developed in the fielding club’s national association”

36. Positional Discrimination
Positional (or role) discrimination occurs if players have unequal access to specific positions in team sports
Players are stacked in specific positions
Consider positions in the NFL in 2010
83 percent of quarterbacks are white
84 percent of wide receivers are black
In general, white players are more likely to be on offense than on defense
Table 10.1 reports similar inequalities in MLB

37. Table 10.1

38. Hockey and Football Hockey has changed since the fall of the Wall
Role discrimination is a possible form of statistical discrimination
A member of a group is being judged based on the average performance of that group instead of individual talent
Troubling because if could be “justified” and self-fulfilling
This could be happening in the NFL
Because there are few black quarterback and their low incidence could be discouraging others from trying

39. Discrimination in Coaching
Minority coaches and managers have become increasingly common
The NFL lags behind MLB and the NBA
See Table 10.2
Women are represented in all major sports, though they generally have little say in personnel decisions
Division I college coaching resembles professional ranks
Minorities are underrepresented at Division II and III schools
Fewer women are coaching – even in women’s sports
Do minority coaches have to be better?
Manning finds that minority NFL coaches have better records
Kahn finds that minority NBA coaches are no more likely to be fired

40. Gender Equity—A Special Case?
Gender equity is harder to measure
Men & women are seldom in the same venue
Babe Didrikson Zaharias, Annika Sorenstam, and Michelle Wie entered the PGA—they are exceptions
Even the same sport may vary: tennis & figure skating
Mixed competition is rare
Mixed tennis doubles is a contrived event
Horse & auto racing are the only real examples
We do not know if there are few women because demand or supply is low

41. Fan Demand for Women’s Sports
Demand for women’s professional team sports, such as soccer or basketball, is much lower than for men’s sports
Women fare much better in individual sports
Tennis is a primary example
Wimbledon TV ratings of women’s tennis is high
Women are paid more in gymnastics and figure skating
Women have recently encountered problems in golf
Number of women’s tournaments has fallen

42. 10.3 Title IX & Discrimination in College Sports
Title IX has been credited with the success of US women in soccer and the Olympics
Titles deals with more than sports
It is part of 1972 Education Amendments to the 1964 Civil Rights Act
It mandates equal access & opportunities for women in federally funded education programs
Secondary schools and college

43. Title IX Compliance Compliance has a long history
It is overseen by the Office of Civil Rights in the Department of Education
There are three ways to comply
Funding and participation must be proportional to enrollment
5% gap is allowed
School must show history of expansion of programs
School must accommodate interests of students
Very few programs are truly in compliance
No school has been penalized/sanctioned

44. Title IX Impact Some results are desirable. Title IX
Spurred rapid growth in women’s sports
Most of the growth was in the 1970s and 1980s
Gave women grounds to seek remediation
Some results are undesirable
Many colleges have cut men’s programs rather than expand women’s programs
As rewards to coaching have risen, women coaches have disappeared
Fell from ~80% of coaches in women’s sports to ~44%