How Much Is a Win Worth? An Application to Intercollegiate Athletics

How Much Is a Win Worth? An Application to Intercollegiate Athletics

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Article ID: iaor2017340
Volume: 63
Issue: 2
Start Page Number: 548
End Page Number: 565
Publication Date: Feb 2017
Journal: Management Science
Authors:
Keywords: management, marketing, investment
Abstract:

Intercollegiate athletics in the United States have become a multibillion‐dollar industry over the past several decades. In this study, we investigate the short‐ and long‐term direct monetary effects of operating a winning athletics program for an academic institution of higher education. We construct a unique panel data set from multiple sources and utilize the latest dynamic panel data estimation methods to account for heterogeneity while also addressing endogeneity concerns. We find that success in men’s football and basketball has a significant impact on a school’s respective football and basketball revenues; however, the effect is different based on the type of school. We find that regular season wins in football account for most of the increase in revenue for established schools, whereas invitations to prestigious postseason bowl games play a big part for less‐established schools. Furthermore, we find that student population and education quality dissipate the effect of athletic success on monetary payoffs. We find that success in basketball carries over more from the past than in football with additional contemporaneous marginal effects for established schools. We do find, however, that past athletic success carries over significantly to the present in both football and basketball, suggesting the significance of the long‐term monetary effect of athletic success to many academic institutions in the United States. This paper was accepted by Pradeep Chintagunta, marketing.

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