Hunsberger and Gitter Blue Chip MRP

Hunsberger and Gitter Blue Chip MRP - Article What is a...

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Article What is a Blue Chip Recruit Worth? Estimating the Marginal Revenue Product of College Football Quarterbacks Peter K. Hunsberger 1 and Seth R. Gitter 2 Abstract The National Collegiate Athletic Association has faced growing scrutiny due to the perceived disparity between the compensation athletes receive and their contri- bution to athletic revenue. Our novel use of college football game–level statistics shows a gap of millions of dollars between compensation and marginal revenue product (MRP) for elite quarterbacks, consistent with previous studies. Professional sports typically weight pay toward ex ante expected value of performance rather than incentives that pay ex post of performance. Using high school prospect rank- ings, we show ex ante estimates of elite quarterback expected MRP are substantially lower, roughly US$400,000, and have limited statistical significance with respect to winning or revenue. Our ex ante measurements suggest that expected player value may be closer to the value of scholarships than previous research suggests due to the difficulty in predicting which high school quarterbacks will excel in college. Keywords college football, college sports revenue, quarterback 1 Johns Hopkins University, Baltimore, MD, USA 2 Department of Economics, Towson University, Towson, MD, USA Corresponding Author: Seth R. Gitter, Department of Economics, Towson University, 8000 York Road, Towson, MD 21252, USA. Email: [email protected] Journal of Sports Economics 2015, Vol. 16(6) 664-690 ª The Author(s) 2015 Reprints and permission: DOI: 10.1177/1527002515580938 at UNIV OF OREGON on May 11, 2016 Downloaded from
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Introduction College football players spend nearly twice the amount of time on practice and con- ditioning as they do in the classroom (Jenkins, 2014). They are compensated for this effort with a grant for education, housing, and food. The National Labor Relations Board (NLRB) recently ruled that college football players should be considered employees of their university and therefore be given the right to unionize. This rul- ing, along with a growing belief that athletes are not compensated commensurate with their contribution, has motivated a call to increase compensation. The data trends support the idea of a growing gap, as National Collegiate Athletic Association (NCAA) football revenue grew 42 % during our sample period from 2004-2012, while student-athlete compensation remained relatively constant. The NLRB ruling may signal the start of negotiations for players to receive better compensation in order to shrink this gap. Measuring compensation is fairly straightforward; however, due to the team nature of football, estimating players’ marginal revenue product (MRP) is challenging. This study estimates MRP for college football quarterbacks from Bowl Cham- pionship Series (BCS) conferences.
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  • Spring '08
  • Waddell,G
  • Economics, The American, American football, Blue chip, College football, Bowl Championship Series, BCS conference, QBR

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