Finding
Using financial data spanning 2004–2011 from 114 major schools, I estimate the MRP of players sorted into three ex post quality tiers, and find that while eventual NFL draftees generate revenue that significantly exceeds their compensation, a majority of scholarship players do not.
Paper
Are you hiring Johnny Football or Johnny Doe? Uncertain labour quality and the measurement of monopsony in college football
Abstract
ABSTRACT I assess monopsony in the college football labour market as it relates to both typical and elite performers, while also accounting for the uncertain performance quality of prospective players who are in this labour market. Existing studies suggest that the marginal revenue product (MRP) of elite collegiate players later drafted into the National Football League (NFL), significantly exceeds their compensation. These comparisons overstate monopsony rents because schools don’t know ex ante which prospects will become these elite performers. Using financial data spanning 2004–2011 from 114 major schools, I estimate the MRP of players sorted into three ex post quality tiers, and find that while eventual NFL draftees generate revenue that significantly exceeds their compensation, a majority of scholarship players do not. Then, using Rivals.com talent ratings of 6,604 prospective players recruited from 2002–2008, I estimate the probability that prospects will reach each ex post quality tier given their ex ante ratings. MRP estimates are adjusted by these conditional probability estimates to reflect the expected MRP of prospects, which allows more appropriate assessment of monopsony rents. I find that schools possess substantially less monopsony power than unadjusted MRP estimates suggest.
Authors
M. Makofske
Journal
Applied Economics