The Dynamic Advertising Effect of Collegiate Athletics

by Doug J. Chung

Overview — The primary form of mass media advertising by academic institutions in the United States is, arguably, through its athletics program. This study investigates the possible advertising effects of intercollegiate athletics. Specifically, it looks at the spillover effect and the magnitude and divergence that athletic success has on the quantity and quality of applications received by an academic institution of higher education in the United States. Overall, findings show that athletic success has a significant impact on the quality and quantity of applicants to these institutions. However, athletic success has relatively more importance to the students with lower ability. Students of higher ability have a stronger preference for the quality of education compared to their lower-ability counterparts. Key concepts include:

When a school goes from being mediocre to being great on the football field, applications increase by 18.7 percent.
To attain similar effects, a school has to either decrease its tuition by 3.8 percent or increase the quality of its education by recruiting higher-quality faculty who are paid five percent more in the academic labor market.
Schools become more selective with athletic success. For a mid-level school, in terms of average SAT scores, the admissions rate improves by 5.1 percent with high-level athletic success.
Students with low ability value the historical success of intercollegiate athletics over longer periods of time.
Surprisingly, students with high SAT scores are also significantly affected by athletic success.

Author Abstract

I measure the spillover effect of intercollegiate athletics on the quantity and quality of applicants to institutions of higher education in the United States, popularly known as the "Flutie Effect." I treat athletic success as a stock of goodwill that decays over time, similar to that of advertising. A major challenge is that privacy laws prevent us from observing information about the applicant pool. I overcome this challenge by using order statistic distribution to infer applicant quality from information on enrolled students. Using a flexible random coefficients aggregate discrete choice model-which accommodates heterogeneity in preferences for school quality and athletic success-and an extensive set of school fixed effects to control for unobserved quality in athletics and academics, I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics goodwill is significant only for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with low-ability students than with their high-ability counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students.