1. Labor Markets in Professional Sports

2. An Overview Labor Markets Human Capital Monopsony and Free Agency
Salary Arbitration
Superstars and Winner-take-all
When to turn pro?

3. What would Babe Ruth earn today?
Ruth earned $80,000 for the 1930 New York Yankees
1930 CPI = 16.7
2011 CPI =
Ruth’s 1930 salary in 2012 dollars is:
(80,000)( /16.7) = $1,077,552
“I know, but I had a better year than Hoover.” Reported reply when a reporter objected that the salary Ruth was demanding ($80,000) was more than that of President Herbert Hoover's ($75,000)

4. Average Salaries in Pro Sports (Nominal $)
MLB
NFL
NHL
NBA
1970
29,303
41,000
25,000
1972
34,092
45,000
1974
40,839
56,000
65,000
1976
51,501
78,000
86,000
1978
99,876
100,000
92,000
139,000
1980
143,756
117,000
108,000
170,000
1982
241,497
157,000
120,000
212,000
1984
329,408
279,000
118,000
275,000
1986
412,520
288,000
144,000
375,000
1988
438,729
307,000
172,000
510,000
1990
597,537
430,000
211,000
750,000
1992
1,082,667
551,000
368,000
1,100,000
1994
1,168,263
674,000
562,000
1,441,000
1996
1,119,981
807,000
892,000
1,979,000
1998
1,398,831
1,000,000
1,167,713
2,818,000
2000
1,895,630
1,116,100
1,642,590
2,901,595
2002
2,295,694
1,300,000
1,790,000
3,893,801
2004
2,486,609
1,333,333
1,830,000
3,748,659
2006
2,866,544
1,947,898
1,751,845
4,176,241
2008
3,154,845
2,205,792
2,234,225
5,365,000

5. NBA
MLB
NHL
NFL

6. Labor Market: Competitive Model$ S1 w1 D1
Labor L1

7. Labor Supply Income-leisure tradeoff Wage increase causes:
Substitution Effect
Income Effect
(work effort rises)
(work effort falls) $ S
IE > SE w*
Backward-bending labor supply curve
SE > IE
Labor

8. Labor Demand Profit-max decision by employers
Hiring Rule: hire until MRP = w
Reflects DMR
MRP = MP* MR
MP = ∆Q/ ∆L
MR = ∆TR/ ∆Q = P $ w1 w2
MRP L1 L2
Labor

9. Estimating a Player’s MRP
Scully (1974): two-step model using data
PCTWIN = f(PRODUCTIVITY)
REV = g(PCTWIN)

10. TSA = Team Slugging Average
TSW = Team Strikeout – Walk Ratio
NL = National League
CONT = Contender
OUT = Out of contention
SMSA = Market Population
MARGA = Differences in Fan Interest
STD = Stadium Age
BBPCT = % Black Players
Scully’s Results
PCTWIN = TSA TSW – NL CONT – OUT
REV = -1,735, ,330 PCTWIN + 494,585 SMSA MARGA +
580,913 NL - 762,248 STD – 58,523 BBPCT
1 point increase in TSA raises PCTWIN by 0.92
1 point increase in PCTWIN raises REV by $10,330
MRP per point = MP x MR = (0.92)(10,300) = $9,504
Avg Hitter: .340
1/12 of team’s offense
MRP = ($9,504)(340)(1/12) = $270,000

11. Results Scully (1974): Players paid 10-20% of MRP Krautman (1999)
Apprentice: 27% of MRP
Journeyman: 85% of MRP
Free agents
Alternative Explanation: Low salaries of younger players may
reflect general training

12. Example: The Mark McGwire Show
During McGwire’s record-breaking run at the home run record in 1998, attendance in St. Louis increased by 1.5 million.
Even if McGwire was only half of the reason, just the gate portion of his MRP that year was around $15 million!
McGwire earned $8.9 million that year.
Wins Score Approach: #2 and #3

13. Applications
Decrease in television revenues due to fan preference for drama shows
Increase in the number of players available
A minimum salary set above the equilibrium wage

14. Human Capital Theory General Training Specific Training
Productivity
Earnings
General Training
Increases MP to all employers
Specific Training
Increases MP to specific firm

15. Who Pays for Training? Hiring Rule: MRP = w $ MRP1 = untrained worker
MRP1 – T = trainee’s net productivity
MRP2
MRP2 = trained worker
Benefit
MRP1
Cost
MRP1 - T
Training period
Hiring Rule: MRP = w t1
time
GT: worker pays in form of lower training wage
ST: worker and firm share costs

16. Minor Leagues Baseball First Contract Season:
Single A: $1100/month
AAA: $2500/month
Open to negotiation after that
Meal money: $20 per day

17. Economics of Superstars
Forbes Top 100 Celebrities and CEOs

18. Economics of Superstars
Rank order tournaments: golf, tennis, auto racing
difficult to measure absolute effort (MRP) when many factors are involved
relative productivity matters rather than absolute $ MC
MR1
Increasing MC of effort requires
large difference between first and
second place for optimal effort.
MC′
MR1′
MR2 E2 E1
Effort

19. Which of the following achievements would please you more?
You win fortune without fame: you make enough money through successful business dealings so that you can live very comfortably for the rest of your life.
You win fame without fortune: for example you win a medal at the Olympics or you become a respected journalist or scholar.

20. You are offered a banned performance-enhancing substance that comes with two guarantees: 1. You will not be caught You will win every competition you enter for the next five years, and then you will die from the side effects of the substances. Would you take it?
Yes No
Prisoner’s Dilemma?

21. When to Turn Pro?
1 million high-school football players - roughly 150 will make it to the NFL
Odds of a high-school player going professional in football - approximately 1 in 6,000
About 500,000 high-school basketball players - roughly 50 to the NBA
Less than 3% of all college seniors will play one year in professional basketball
Odds of a high-school player going professional in basketball - approximately 1 in 10,000

22. When to Turn Pro? Why would a player choose to leave early?
Must compare the marginal cost and marginal benefit of staying in school versus leaving.
Marginal Benefit of waiting the extra year is:
MB = (1 + g)S0
[where S0 is the pro salary and g is the growth rate in the salary]
Marginal Cost of waiting is the foregone salary plus the sacrifice on the use of that salary:
MC = (1 + r)S0
[where r is the interest rate]

23. When to Turn Pro? As usual, the player is best off when MB = MC
Player should stay in school as long as g > r
Player should turn pro when r > g
(1 + g)S0 = (1 + r)S0

24. Sample Problem
Suppose a junior could earn a salary of $750,000 by declaring himself eligible for the draft. If he waits until his senior year he can make $900,000. If the interest rate is 4% should he stay the extra year?
g = (900,000 – 750,000)/750,000 = 0.20 or 20%
Assume the pro league plans to institute a rookie salary cap of $750,000 at the end of the player’s senior year. Should the player play his senior year?
g = (750,000 – 750,000)/750,000 = 0.00 or 0%
Now consider that the player has a 12% chance of having a career ending injury in his senior year and thus having a median income of $40,000 per year. Would he consider going pro or not?
g = (796,800 – 750,000)/750,000 = or 6.2%

25. Labor Market Imperfections
Monopsony
Reserve Clause
Salary Caps
Player Draft
Arbitration
Unions

26. Reserve Clause & Free Agency
MLB: 1976
After 6 years of service
NBA: 1983
After 5 years of service
NHL: 1993
After 4 years of service
NFL: 1994
Restrictions:
Right of First Refusal
Compensation requirements
Salary caps

27. Coase Theorem Revisited
Reserve Clause vs. Free Agency
Initial assignment of property rights does not affect efficiency of resource allocation
Only difference is who gets larger share of pie

28. Final Offer Arbitration
MLB 1972
Arbitrator must select either team’s or player’s final offer—No compromise!
must base decisions on info regarding player performance and salaries of comparable players
can not consider financial condition of team
Overpaying a player leads to further overpaying down the road
: Owners-291, Players-214
Wage WT WA WP

30. Salary Caps NBA NFL “soft cap” Percentage of league revenues (51%)
$58.68m in
NFL
Hard cap
Percentage of league revenues (65%)
$116m for 2008
$127m for 2009
No cap for 2010
Maximum Player Salaries
Minimum Player Salaries
Minimum Team Salaries = 86% of cap

31. Monoposony Worksheet Example Sole buyer of labor
Enables employer to exert market power by paying lower wages
Monopsonist hires until MRP = ME and sets wage off S curve
Lm < Lc
wm < wc < MRPm $ ME S
MRPm wc wm
D = MRP Lm Lc
Labor

32. Player Drafts Allocation of new players by reverse order finish
NBA: 7  2 rounds
NFL: 12  7 rounds
Coase Theorem applies

33. Labor Unions and Labor Relations

34. Economics of Labor UnionsSU $
Free Market: wN, LN
Union Outcome: wU, LU
Unemployment
Inefficiency (DWL)
unemployment SN wU wN
DWL D LU LN
Labor

35. Bilateral Monopoly Union behaves as monopolist:
Sets employment where MR = S
Sets wage off D curve
WU, LU
Employer behaves as monopsonist:
Sets employment where D = ME
Sets wage off S curve
WM, LM $ ME S wU wM MR D LU LM
Labor
WU – WM = Range of Indeterminacy

36. Bargaining and Strikes
Each of major sports had a work stoppage during 1990s (when overall labor strife was pretty tame)
Why resort to a strike/lockout?
Irrational behavior?
Excessive optimism?
Excessive uncertainty?
Political gamesmanship?

37. Contract Zone Strike fund Alternative jobs Union threat point = WU
Acceptable to Union
Contract
Low Wages
High Wages
Zone
Acceptable to Employer
WE = employer threat point
Strike insurance
Replacement workers

38. Baseball’s First Strike
1912 Detroit Tigers
Ty Cobb vs Ban Johnson

39. 1972 Baseball Strike Main issue was player pension and health benefits
Uncertainty
Owners were over-optimistic (believed players' threat point was lower than it was)
MLBPA was optimistic due to Commissioner’s behavior
Strike lasted 13 days (including 9 days at the start of the season)
Owners lost $5m in revenues
Players lost salaries but won on pension demands
Arbitration was added to CBA
: a strike/lockout preceded every CBA

40. 1987 NFL Strike Main issue: free agency
Uncertainty: Gene Upshaw and demise of USFL
Strike lasted 4 weeks (weeks 3 – 6)
Replacement players cost $1000 per game; teams profits rose by more than $100k per game
Players lost $80m in salary
1988 NFLPA Decertification

41. Hockey: The Lost Season
Lockout
Whole season canceled
Main issues: cost certainty (linking salaries to league revenues)
Uncertainty: league losses
Outcome: $39m salary cap; salaries at no less than 54% league revenues; maximum player salary at 20% of cap; salaries rolled back by 24%
Bob Goodenow
Gary Bettman
Revenue sharing; luxury tax; 5% pay cut
Revenue sharing; luxury tax; 24% pay cut
$40m salary cap linked to league revenues
$52m salary cap linked to league revenues
$42.5m salary cap linked to league revenues
$49m salary cap linked to league revenues
Season Canceled!

42. 1998-99 NBA Lockout Main issue: hard salary cap; revenue sharing
Uncertainties: lackluster attendance; turmoil within NBPA; rising power of agents (stars vs benchers)
191 day lockout
Outcome: Individual player salary cap; players guaranteed 55% of BRI; limit on raises for “Larry Bird” free agents
 50 game season
NBA would be paid TV contract money
even though games weren’t played.
Arbitrator ruled NBA did not have to pay
Players with guaranteed contracts

43. Discrimination in Sports

44. Jackie Robinson
1947 Brooklyn Dodgers
Larry Doby
1947 Cleveland Indians
Kenny Washington and Woody Strode
1946 Los Angeles Rams
Willie O’Ree
1958 Boston Bruins
Earl Lloyd
1950 Washington Nationals

45. Labor Market Discrimination
Becker “rational choice” model
Source of prejudice:
Employers
Employees
Customers
Gary Becker
Nobel Prize (1992)

46. Employer Discrimination
Hiring Rule: w = MRP
Workers with same MRP will be paid same wage
Assume:
MRPB = MRPW
d = discrimination coefficient
Perceived wage of black player: w*B = (1+d)w
“Psychic cost”
Example:
w = $20
d = 0.20
w*B = (1.20)(20) = $24

47. In a picture… $ LB LW Note:
Black wage as perceived by
discriminating firm
w*B = $24
w = $20
wB = $16.67
MRPB = MRPW
Black wage if firm hires same number
of black works as white workers LB LW
Players
Note:
> Owners must pay for the right to discriminate
in the form of lower profits.
> Competitive markets force discriminators out
of the market.
Employment if blacks are paid
same wage as whites: w = $20

48. Monopoly Power Baseball has legal cartel
Jackie Robinson and Branch Rickey
1947 contract signing
Monopoly Power
Baseball has legal cartel
Bill Veeck foiled in 1943
Dodgers/Indians reintegrated in 1947
Integrated teams tended to dominate
Dodgers, Giants, Indians, & Braves
Red Sox & Phillies last to integrate
Great Celtic teams built on integration
Moses “Fleetwood” Walker
1880s A.A.
Bill Veeck and Larry Doby
1947 contract signing

49. Employee Discrimination
Early whites didn’t want to work with blacks
Feel psychic cost
Demand higher pay to work with blacks
What would employer do?
Segregation vs Discrimination
Dodgers protested Robinson’s presence
Bud Fowler 1885
Read unexpurgated text of Durocher’s speech

50. Customer Discrimination
Employer punished for tolerance
Celtics of the 1980s?
George Preston Marshall & NFL’s Redskins
Last NFL team to integrate: 1962
“Burgundy, Gold, and Caucasian”
Southern focus
Forced by U.S. government
Facility on government land
Nardinelli and Simon (1990)
Examined baseball card prices for black and white players
PB < PW by about 10%
"We'll start signing Negroes when the Harlem Globetrotters start signing whites."

51. Measuring Discrimination
White
Wage
Function
Ww = $500 $
WB = $200
$500 = Ww
How much of the wage gap, if any, is due to discrimination?
Black
Wage
Function
$260 = W*B
$200 = WB
SAB
SAw
Slugging Average
Ww – WB = observed wage gap
= 500 – 200 = 300
W*B – WB = explained wage gap
= 260 – 200 = 60
Ww – W*B = unexplained wage gap
= 500 – 260 = 240

52. Statistical Discrimination
The use of group averages to judge individual productivity levels
Profit-maximizing strategy to reduce cost of hiring
French-speaking
Canadian players
English-speaking
Canadian players F E
MRPE
MRPF
productivity

53. Economic Findings on Pay Discrimination
There is evidence that pay discrimination existed in pro team sports in the past.
But by the mid-1990s, pay discrimination is pretty much gone. Only a negligible premium for the very best white players in the NBA appears to remain.
Interestingly, in the NHL, there appears to be pay discrimination against French-speaking players.

54. Role Discrimination? NFL 2009 Position White Black Quarterback 81% 16%
Wide Receiver
11%
87%
Source: 2010 Racial and Gender Report Card

55. Racial Composition of Athletes, 2010
Race
MLB
NFL
NBA
White
60%
30%
18%
African American 9%
67%
75%
Latino
28% 1% 3%
Asian 2%
Other 0%
<1%
Source: 2010 Racial and Gender Report Card

56. Racial Composition of Head Coaches, 2010
Race
MLB
NFL
NBA
White
68%
81%
70%
African American
14%
19%
27%
Latino
17% 0% 3%
Asian
<1%
Source: 2010 Racial and Gender Report Card

57. Racial Composition of Division I Head Coaches (men’s teams), 2007-08
Race
Basketball
Football
White
76%
94%
African American
23% 5%
Latino
0.7%
0.5%
Asian
0.0%
Native American
0.3%
Source: 2009 Racial and Gender Report Card

58. Gender Discrimination
Harder to measure
Men & Women seldom in same sport/venue
Even same sport may vary
Tennis, figure skating, & basketball

59. Top Money Winners: ATP vs WTA
ATP Money Leaders
WTA Money Leaders
Rank
Player
Country
Earnings 1
Novak Djokovic
Serbia
$ 3,323,881
Victoria Azarenka
Belarus
$ 4,008,080 2
Roger Federer
Switzerland
$ 2,316,585
Maria Sharapova
Russia
$ 2,083,350 3
Rafael Nadal
Spain
$ 1,725,465
Agnieszka Radwanska
Poland
$ 1,650,459 4
Andy Murray
Scotland
$ 1,053,481
Caroline Wozniacki
Denmark
$ ,188 5
David Ferrer
$ ,998
Petra Kvitova
Czech Rep
$ ,690 6
Juan Martin del Potro
Argentina
$ ,238
Kim Clijsters
Belgium
$ ,691 7
John Isner US
$ ,701
Sara Errani
Italy
$ ,265 8
Tomas Berdych
$ ,801
Marion Bartoli
France
$ ,326 9
Jo-Wilfried Tsonga
$ ,678
Julia Goerges
Germany
$ ,670 10
Radek Stepanek
$ ,048
Angelique Kerber
$ ,207 11
Nicolas Almagro
$ ,736
Ana Ivanovic
$ ,784 12
Milos Raonic
Canada
$ ,883
Maria Kirilenko
$ ,903 13
Jurgen Melzer
Austria
$ ,313
Svetlana Kuznetsova
$ ,038 14
Leander Paes
India
$ ,103
Vera Zvonareva
$ ,983 15
Kei Nishikori
Japan
$ ,245
Samantha Stosur
Australia
$ ,344
Source: tennis.com. As of April 16, 2012.

60. Purses in Golf’s Majors (in millions): 2011 for PGA, 2010 for LPGA
Men
Women
Masters
$7.5
Kraft Nabisco
$2.0
US Open
7.5
3.25
British Open
7.3
2.5
PGA
LPGA
2.25
Source: PGATour.com and LPGA.com

61. Gender Discrimination
Harder to measure
Men & Women seldom in same venue
Often don’t play same sport
Even same sports may vary
Tennis, figure skating, & basketball
Direct competition?
Jockeys & auto racing & golf
Are women always victims?

62. Title IX Part of 1972 Education Amendments to Civil Rights Act
Mandated equal access & opportunities for women in federally funded education programs
3 ways to comply
Funding proportional to enrollment
Show history of expansion
Interests of students accommodated
Few programs in compliance
But NCAA certifies all
Title IX reads: “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.”
Marietta College
Roster Slots
Male Enrollment
726
51.2%
Male Athletic Participation
298
61.3%
Female Enrollment
692
48.8%
Female Athletic Participation
188
38.6%
Total
1418
100%
486

63. Impacts of Title IX Good Bad Spurred rapid growth in women’s sports
Though most of growth early on
Gave grounds to seek remediation
Bad
What happened to women coaches?
Was ~80% of women’s programs - now ~ 44%
Women’s programs lose money
Can meet in many ways –
Cut men’s programs rather than expanding women’s

64. Amateurism and College Sports

65. Overview
College sports is similar in many economic ways to pro sports, but the relationship between the athletics department and the university deserves careful attention
Conferences and the NCAA play an important role in limiting competition, negotiating TV broadcasts, and managing competitive balance.
NCAA player rules have dramatic impacts on the economic welfare of college athletes.
Colleges enjoy special tax and antitrust status for much the same reason as pro owners.

66. Amateurism & the Olympic Ideal
Ancient Olympics (776 BC-393 AD)
Even central myth hypocritical
Winners well rewarded by home cities
Modern Olympics (1896-present)
“mens sana in corpore sano”
Amateurism reflected class snobbery
Laborers not considered amateurs

67. American College Sports
Commercialism & Corruption always present
1st competition: 1852 Harvard v. Yale in crew
Sponsored at a resort by a railroad company
2nd competition brought first eligibility scandal
Harvard’s coxswain had already graduated!
Second sport: Football
Rutgers v. Princeton (1869): First academic scandal
4 Rutgers players were flunking math
University of Michigan (1894)
7 of 11 starters were not registered students

68. NCAA as “Incidental Cartel”
Restricts movement
Prevents “tramp athletes”
Monopsony power
Players have little mobility
Drives down pay
In the movie Horsefeathers Groucho Marx goes to a speakeasy find football players for Huxley University.

69. NCAA Recruiting Game OSU High Low UM 50 20 90 75 Dominant Strategy?
Competitive Equilibrium?
Cooperative Optimum?

70. Athletic Scholarships
Citadel
UVA
VMI
VPI
UMD
Villanova
Boston College
NCAA forbade them until 1956
NCAA rules often ignored
“Seven Sinners”
Bear Bryant evaded scholarship limits by putting recruits on the track team

71. The “Student Athlete” “Student athlete” is a legal term
Disavows desire for pay
Colleges do not have to provide workmen’s compensation
Stars worth more than tuition (Brown 1993; 1994)
In football >$500k/yr
In basketball >$800k/yr

72. The Value of an Education
An athlete who…graduates is overpaid” Joe Paterno
Do athletes get an education?
On average athletes graduate at the same rate as non-athletes
Handout
Long and Caudill (1991)
Male college athletes earn more than non-athletes

73. Why do Some Sports do Worse?
Some athletes less prepared
Lower SATs, HS rank, HS GPA
True for basketball & football
Not so for softball or golf
Is dropping out a rational investment?
Go to Florida State to get to NFL?
Go to Harvard to become a physicist?

74. Academic Standards Preserve academic integrity
Don’t recruit students who cannot read
Creates barrier to entry
Established powers keep out new entrants
Competitors cannot pay athletes more
Now cannot take weaker students either

75. History of Standards Nothing uniform until 1965
1.600 Rule
To play needed projected GPA
1973: Replaced with 2.00 rule
Ostensibly higher standards
Actually needed C+ average in high school
Could take any courses
Worst abuses came under this rule
The sad case of Chris Washburn
470 out of 1600 on SAT

76. Proposition 48 (1983) Provisions Was Prop 48 Racist?
Needed SAT=700 & GPA=2.00 in 11 core courses
If not: no scholarship in 1st year & cannot play
Was Prop 48 Racist?
Disproportionately affected black athletes
SATs for blacks average 200 points lower
Are SATs a valid predictor of college performance?
Still – graduation rates rose for whites and blacks
A concession: Partial Qualifiers
Could receive aid if pass one criterion

77. Proposition 42 (1989) Meant to eliminate partial qualifiers
Loophole restored – and then some
Under Prop 48 scholarship “counted”
Under 42 doesn’t count against limit

78. Proposition 16 (1992) Created sliding scale
Lower GPA permitted if SATs higher & vice versa
Clearinghouse evaluated individual courses
Allows partial qualifiers to practice
Challenged in court
Students claimed disparate racial impact
Won initial case
Verdict overturned on technicality
NCAA does not disburse federal funds

79. Latest Revision (2003) Eases initial restrictions
14 core courses (up from 13)
Sliding scale
2.0 core GPA requires 1010 SAT
3.55 core GPA requires 400 SAT
No Partial Qualifier status
Stiffens progress requirements
Need 40% of degree requirement after 2nd year
Need 60% of degree requirement after 3rd year
Need 80 % of degree requirement after 4th year

80. Academic Progress Rates (APR)
School scored for student progress
1 point if athlete stays enrolled
1 point for staying academically eligible
Computes % of total possible points
Consider Big State U’s basketball team
52 possible points (13 players *2 points*2 semesters)
If one player is ineligible in spring – lose 1 point
APR=100*(51/52)=981
If its score falls below 925, BSU could lose scholarships

81. Entry Barrier or Academic Standards?
Small schools
May be unable to compete with larger schools
Faculty fear
Greater pressure to pass
Proliferation of garbage classes

82. Profitability of Specific Programs at Division I-A Schools (measured in $1000s)
Sport
1997
1999
2001
2003
All Men’s Sports
3,300
4,000
4,900
6,100
Football
3,200
3,700
4,700
5,920
Men’s Basketball
1,600
2,020
Women’s Basketball
- 500
- 600
- 700
- 775
All Women’s Sports
-2,300
-2,400
-3,200
-3,600
Source: Table 11.8, Leeds and Von Allmen, 2008
NCAA Financial Database
Football Coaches Salary Database

83. March Madness
NCAA has 14-year, $10.8 billion contract: CBS & Turner Sports
Tourney revenue now $810 million/year
$770m in TV rights
$40m from ticket sales, etc.
~60% goes to Division I conferences & schools
$167m distributed according to program size
Number of sports offered
Number of athletes on scholarship.
$167m distributed according to performance
Conference gets 1 "unit" per member game
Each unit worth ~$222,000.

84. Non-Profit vs Profit Seeking
Principle-agent problem
Growing payroll costs for sports programs

85. Clicker Review

86. A college player should stay in school when:
staying in college another year increases his earnings.
staying in college another year increases his earnings above the interest rate.
staying in college another year increases his earnings below the interest rate.
staying in college another year reduces his earnings.

87. Salaries have risen dramatically in the NBA because of the dramatic rise in
the quality of the players
the opportunity cost faced by players
the market value of the product the players produce
the strength of the Players’ Association

88. According to the Coase Theorem, free agency should leave the distribution of talent
more equal than before
less equal than before
exactly equal among all teams
the same as it always was

89. Free agency came to MLB and the NFL in different ways because
the football owners practiced collusion while the baseball owners did not
the MLBPA had to rely on the courts
the NFLPA had to rely on the courts
the NFL had a limited exemption from antitrust laws, and baseball did not

90. In November 1989, the NFL Players Association, the union for NFL players, disbanded. Why?
The union was bankrupt due to failed strikes in 1982 and 1987.
The players were upset with the union’s lack of ability to gain full free agency for its members and wanted to bring in new leadership.
The union wanted to remove the NFL’s non-statutory labor exemption and pursue an antitrust claim against the league. This could only be done by decertifying the union.
The court had declared in Powell v. NFL (1987) that the union was guilty of conspiring against the NFL in order to raise wages.

91. Most mainstream economists view discrimination as
a taste.
overstated.
a mistake due to the misperception of people’s true skills.
a way for capitalists to keep the working class from uniting.

92. Integration was much faster in football than in baseball because
of the competition provided by a rival league
the owners in the NFL were less discriminatory than the owners in MLB
football fans are far less discriminatory than baseball fans
football had to get the approval of liberal-minded colleges and universities

93. It is difficult to determine whether women are victims of discrimination in professional sports because
women have brought far fewer discrimination suits
women seldom compete with men in the same event
women aren’t as good at sports as men
it is difficult to separate out racial effects from gender effects

94. The notion of a “student-athlete” was developed in order to
assert the primacy of education
eliminate under-the-table payments to athletes
keep athletes from filing for workman’s compensation
prevent gambling scandals

95. The University of Michigan’s Athletic Department cannot break even because
it is very poorly run.
its costs rise as quickly as its revenues rises.
it gives much of what it makes to the academic side of the university.
NCAA rules prohibit Athletic Departments from making a profit.

96. The shift to “two-platoon football” was a way for
professional teams to turn profits into losses
colleges to exploit “student-athletes”
the NFL to exert monopsony power over its players
colleges to spend increasing revenues

97. The monopoly power that the NCAA held over TV networks fell apart due to
The prisoner’s dilemma
The winner’s curse
The outlawing of the reserve clause
The entry of new schools into the NCAA