Applied Economic Consultants

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Case Studies


United States District Court for the Central District of California, Western Division

The National Collegiate Athletic Association (“NCAA”) and its Division I member schools restrict the amount of athletic-based financial aid that student-athletes may receive below the actual cost of attending college.  Suit was brought on behalf of a class of student-athletes alleging that this restriction is an illegal restraint of trade under Section 1 of the Sherman Antitrust Act.  applEcon was engaged to show that class members were harmed by the NCAA’s restriction, and to calculate the amount by which class members were harmed.

applEcon’s expert economist drew upon a broad set of evidence to show that the effect of the NCAA’s allegedly illegal restraint of trade reduced the amount of aid received by class members:

·         schools generally grant the maximum amount allowable under the NCAA’s rules;

·         consistent with the economic theory of cartel behavior, some schools attempted to “cheat” on the cartel by offering student-athletes an amount greater than that allowed by the NCAA;

·         the gap between schools’ expenditures on athletic scholarships and schools revenue from sports is growing; so is the gap between athletic scholarships and professional players’ incomes;

·         student-athletes’ marginal revenue product exceeds the actual cost of attending college for the majority of class members.

Our analysis showed that, absent the NCAA’s allegedly illegal limit, student-athletes would have received scholarships worth at least their actual cost of attending college.