David R. Henderson  

Basketball Team Composition and Relative Prices

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I've been too busy to watch much of the NCAA March/April madness, but I started watching the final game tonight. When I realized that it's a private school (Duke) vs. a government school (U. of Wisconsin), I made a prediction.

I predicted that when the 5 starting members of each team were announced, at most one Duke player would be from North Carolina and at least 3 Badgers would be from Wisconsin.

Why? Not the relative populations of the two states: In fact, North Carolina's population is almost double Wisconsin's.

The reason is relative prices.

Think about the recruiter's challenge. At Duke, it doesn't matter whether you recruit from North Carolina or from anywhere else. Either way, if you give a scholarship, you have to come up with the steep tuition, and the tuition is the same whether the recruit is from Durham or Durango.

At Wisconsin, it matters a lot where the recruit is from. If the recruit is from Wisconsin, the team doesn't have to come up with the steep out-of-state tuition. If the recruit is from outside Wisconsin, by contrast, the team has to come up with that steep fee. So the relative price of a Wisconsinite is well below the relative price of a non-Wisconsinite. QED.

Sure enough, the numbers worked out.


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CATEGORIES: Microeconomics




COMMENTS (10 to date)
Sam Haysom writes:

So how then do you account for the fact that every single walk-on (non-scholarship) player on the Badgers is from Wisconsin? If your logic holds you would maximize your geographic scope in selecting your walkons. the "steep fee" is a 17K in/ out of state differential at UW. That is a drop in the ocean for 20 million dollar generating program.

What your really seeing is a vast disparity in recruiting abilities for the two schools. Wisconsin is limited to recruiting regional players while Duke can recruit from everywhere. The team Wisconsin beat in the final four UK, which is also a public school, had just one person from Kentucky start a game for them all year and he only started in three games. Unlike Wisconsin , UK recruits nationally. Your analysis might make sense for football where you are talking about 70 or so scholarships per program but for a 15 man basketball program, especially in a major conference, the marginal difference between in and out if state tuition is insignificant.

Joe In Morgantown writes:

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JLV writes:

You could tell a different story suppose you are a Division I level player from North Carolina choosing a college, and you have some degree of home bias. You have three legitimate choices: UNC, NC State and Duke (all of which got into the Sweet 16). Do the same exercise as a kid from Wisconsin: you've got one choice: UW.

UNC only has one starter from North Carolina, and NC State has none, I think.

kzndr writes:

Do the teams actually have a budget from which the money for the scholarship is taken or does the university simply waive tuition for anyone the team selects? I'm not sure the process actually makes the athletic program sensitive to the cost to the university.

Jon writes:

I see two problems with this analysis.

1. The value of the scholarships relative to the revenue that can be generated by a top team is miniscule, and

2. There are plenty of state schools in the tournament with few in-state players.

ZC writes:

I highly doubt that a D1 public school in recent memory has avoided recruiting a starting quality revenue sport player (football/men's basketball) out of consideration for the difference between in-state and out-state tuition.

Unlike the head count sports (fixed number of scholarships per year), that consideration undoubtedly comes into play with the equivalency sports (fixed number of scholarship dollars per year divided up to athletes as the coach sees fit).

Brad writes:
What your really seeing is a vast disparity in recruiting abilities for the two schools. Wisconsin is limited to recruiting regional players while Duke can recruit from everywhere. The team Wisconsin beat in the final four UK, which is also a public school, had just one person from Kentucky start a game for them all year and he only started in three games. Unlike Wisconsin , UK recruits nationally.

This is the correct answer. Duke regularly recruits the top 1-3 players at each position nationally each year. NC has very good basketball talent but there are only 1-2 top 5 guys in NC every year and UNC get their share of the them as well as NC State sometimes. If you look at College basketball blue bloods this year they have about 1 home state guy starting Kentucky(0), Kansas (1), UNC (1), Louisvile(1),Arizona(0) etc.

Wisconsin generally has not gotten top classes out of HS. Instead they recruit regionally, have a very good coach and system, and develop players to play at a high level as juniors and seniors. Up until this year that had gotten them sweet 16 elite 8 type finishes. They got lucky and hit home runs with guy that was not that highly rated like Kaminsky and highly rated home state guy like Dekker that pushed them over the top.

Richard writes:

Marginal cost does not equal price.

Michae writes:

The logic holds for the walk-ons. It is not the school that bears the cost of the walk-ons; it is the walk-on. For this reason, it is certainly no surprise that all of the walk-ons are from in-state, since they would have to pay a steep price to go out-of-state to walk on.

Buckland writes:

But it wouldn't have worked had Kentucky beaten Wisconsin in its semifinal game. The University of Kentucky is a state school with no starters from Kentucky.

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