prices, competition, and college sports

[Dave Backus @ NYU]

Some of the best ways to make money involve disguising your self
interest. Nonprofits, for example, practice a combination of price
discrimination and tax arbitrage by giving major donors better
access. You could simply charge more for better seats at the opera,
as they do on Broadway, but how much nicer to give a bonus to people
who support the arts (with money, of course).

Universities are no stranger to this kind of game. In the 1990s, I
think it was (my colleague Larry White would know for sure, it's in
his book), there was an antitrust investigation of financial aid
practices at top universities, which routinely shared information
about aid. The U's argued they were simply making sure students got
what they needed. The Feds argued (I'd say correctly, but you be the
judge) that this was essentially a way to avoid competition on price
discounts.

US college sports are another great example. I love March Madness,
the annual college basketball tournament, even though Denise Ruhl won
the pool this year (she picked UConn, and everyone else was wiped out
early). Like the Olympics years ago, layers of regulation "protect"
amateur athletes from the curse of being paid. Apparently paying them
would violate the amateur spirit of college sports, even though some
of these sports generate tons of money. You can guess what's really
being protected here.

This gets a nice review from Gary Becker, the economics profession's
resident free thinker:

http://www.becker-posner-blog.com/2011/04/the-ncaa-as-a-powerful-cartel-becker.html