Sports News Without Access, Favor, Or Discretion

I'm already starting to see rumblings out there that the recent ruling by Judge Claudia Wilken (of which I present a broader, preliminary analysis here) is somehow incompatible with the existing obligation of universities to comply with Title IX. That's simply false, and it's important to understand why before that narrative takes hold.


Most likely, in my view, the payments contemplated in Judge Wilken's order will be seen as part-and-parcel of the financial aid offer made to male athletes. (Note that these payments are in no way mandatory; all the order says is that the schools and NCAA cannot collude to cap them below the new levels.) As such, payments will fall under the "substantial proportionality" financial aspect of the Title IX law 1. This element says that whatever your male/female athletic ratio is—itself governed by other aspects of Title IX—the dollar amounts of financial aid need to be paid (in aggregate) in proportion to the ratio of male and female participation. If you school has 55 men and 45 women in sports, 55% (+/- 1%) of the money should flow to men and 45% (+/- 1%) should go to women.

(If you'd like to dive in deeper on any of the requirements of Title IX, I recommend my earlier " Title IX in its own words" or the amicus brief I co-wrote in the NLRB case.)


Judge Wilken's order only addresses FBS football athletes and Division I men's basketball athletes. If the injunction withstands appeal and the NCAA and its member schools comply, presumably some schools will begin offering larger grants to those athletes and some will likely include deferred payments right up to whatever new maximum the NCAA chooses. (Given that they can't pick anything below $5,000, the figure is likely to be ... presto $5,000!) That would tend to increase total spending on men, and thus increase the total spending needed to keep the women's programs in proportion.

Nothing in Judge Wilken's order prevents the NCAA from adjusting its rules, if needed, to ensure that women's athletic scholarship aid rises in the needed proportions. Whatever cap the NCAA adopts in the wake of this decision for FBS football or D-I men's basketball could be adopted for any or every women's sport. And then each school can choose how to spend. If, say, it wants to spend $50 more on men's sports, it could a) spend $50 more and then spend a proportional amount on additional aid to women or b) spend $50 in total but divert half of it to women's sports. If NCAA rules that prohibit payments to women athletes cause that to be mathematically impossible (such as, for example, bylw which explicitly limits the financial aid given to women athletes in many sports), that's the fault of those rules, not Title IX or Judge Wilken's decision.


This isn't a new conclusion. I explained it in an academic symposium article in 2011 and in a piece for Slate in early 2014, and the New York Times's editorial page explained it as well. But for those who like to dig in to economic models, I lay out the economics of this in some detail below. Suffice it to say that the most likely outcome of increase spending on men under Title IX is proportionally higher spending on women. It won't be hard to comply with Title IX in this new world. It might be slightly harder to skirt the law's purpose by not matching male spending with female spending, but that seems like a benefit, not a flaw.

A simple model to show how Title IX would most likely work in a truly competitive world

In this model, there is a valued product—call it Product M. There is also a law saying that for every dollar you spend to acquire Product M, you must also ensure that your spending on various Product W's is roughly proportional, though you don't need to spend it all on a single Product W, and can spread it across many Ws.


Let's also assume Product W doesn't ever add profit, even though of course in most real-life uses of this hypothetical, it might.2

Product M, in this hypothetical, is purchased in a very competitive bidding market, where dozens of would-be purchasers calculate the benefit of Product M to their overall revenue (and profit) position, and the highest bidder wins. While the highest bidder, Buyer 1, obviously needs to outbid everyone, most importantly, to win the bid, the highest bid needs to outbid the second highest bidder—Buyer 2. (This is a little like the old joke that says you don't have to actually outrun the bear, you just need to outrun the other guy—if you beat the second highest bidder, you automatically beat the third highest, the fourth, etc.) Thus, we can ignore all the other bids and just treat this like a two-person race. To win that race, you just need to bid a tiny bit more than the maximum amount of value the other firm places of Product M.3


Thus, if we ignore the law that ties M and W together for a moment, the winning bid for Buyer 1 is something like (Total profit of Buyer 2 from acquiring Product M) +$1.

Imagine that Buyer 2 places a maximum value of $500,000 on a specific Product M, figuring that adding Product M to its production function would increase profits by slightly more than $500,000. Thus the winning bid might be $500,001, because with that bid, the profit to Buyer 2 of adding Product M to its firm would be negative ( $-1).


(This is a generic hypothetical. Obviously in some uses, it might not literally be $1—it might be climate, or a nicer set of buildings, or closeness to home, or any non-pecuniary benefit. I don't think this simplification affects the outcome of the analysis. And when I use profit, you can think of it as "net benefit" if you're one of those people who thinks the word profit isn't applicable to other situations that involve costs and benefits, such as non-profits' purchase decisions. So the idea is if the profit is negative, that's including all of the non-cash benefits too—negative profit here literally means you are worse off, in total, with the product than without it.)

But now let's add to our model the law that says for every dollar spent on Product M, you must also spend a dollar on some number of Product W's. And let's look at what that does to Buyer 2's valuation of Product M.


Previously, Buyer 2 figured out that adding Product M would increase profits by $500,000, and so it was willing to spend up to that amount to acquire Product M, but after that, on balance, Product M would cost more than its benefits. Now, each dollar Buyer 2 spends on Product M brings with it a matching dollar of spending on Product W.

Since Product M adds $500,000 to Buyer 2, now the maximum Buyer 2 will spend on Product M is $250,000. This is because that $250,000 purchase of Product M brings with it a second $250,000 of spending on Product W, and so by spending any more than $250,000, Buyer 2 would incur negative profits. For example, spending $300,000 on Product M would bring with it $300,000 of spending on Product W and the total, $600,000 exceeds the benefit of bringing Product M into the fold, resulting in a loss of $100,000. Thus Buyer 2 won't bid more than $250,000, and the winning bid for Buyer 1 is now $250,000 plus $1.


So the winning bid drops by 50%. But before Buyer 1 gets too excited, don't forget that Buyer 1 also has to obey the law and spend an equal amount on Product W. So Buyer 1 win outbids Buyer 2 with a $250,000 (and a penny, whatever) bid, but then must set aside $250,000 for Product W. The result is that Buyer 1 spends the same amount as it would have in a market without this law linking Product M and Product W, but now instead of the payment going exclusively to the seller of Product M, half of it goes to the makers of Product W.

The law cannot raise the net value of Product M. And the law cannot raise the total best amount of spending on Product M. What the law can do is, in essence, tax spending on Product M, and give the tax receipts to Product W. This, in turn, depresses the market rate for Product M. Since the tax ends up being 50% of total spending, the result is that the market rate for Product M is cut in half, but total spending remains the same, with the other half going to Product W.


That's how an auction/bidding market would adjust to the imposition of a law tying spending on one product with spending on another. This is generic economics, but you can think of it as a model for how Title IX would work in a market where (some) male athletes received competitive offers without a specific maximum cap. I used Product M and Product W, but if you want to, you can imagine Product M was a male athlete like Jabari Parker and Product W was spending on women's sports at the various schools that would have been bidding for Parker in an open market when he was coming out of high school. The way I describe the law in the example is not exactly how Title IX works—Title IX has not resulted in dollar-for-dollar matches between financial aid spending on men and on women (which is more like 60/40), and it certainly has not resulted in equal spending on men's and women's sports overall (which is far closer to 80/20 than 50/50, at least in FBS). But we can imagine it is a true dollar-for-dollar match, and the example above shows why even then it doesn't break the bank.

Title IX under the Wilken Injunction

What about the less competitive world envisioned by Judge Wilken, where schools can still cap compensation to something like $10,000 per year more than the current cap, with $5,000 of that deferred until after graduation or exhaustion of eligibility?


The economics are the same, except that if Buyer 1 values Product M the most, but both Buyer 1 and Buyer 2 value Product M more than the cap (and especially more than double the cap4), what will happen is that Buyer 1 can no longer outbid Buyer 2. They, and every other buyer, will all bid the maximum allowed. The winner will win, then, not by paying more directly, but instead by investing in other non-price features—coaches, facilities, etc.—more or less like now. Then, in addition to the $10,000 payment, Buyer 1 will have to pay $10,000 in aggregate for Product W as well. But now the inidrect spending above the $10,000 of direct (current and deferred) payments is probably not subject to Title IX financial proportionality.

This is perhaps the most interesting teaching from comparing the full model to the constrained "injunction" version. While in neither case is complying with Title IX all that difficult, the level of funding for female athletes increases as the cap on male compensation is raised. In contrast, as the cap is made tighter, funding shifts from female athletes (as well as male athletes, of course) to mostly male coaches and to construction companies that profit from facilities. This is because the tighter the cap, the more the money will flow into areas not covered directly by Title IX's financial rules requiring substantial proportionality. The best example of this is coaching pay, where any concern about financial proportionality ended with the Stanley v. USC case that said men's team coaches can be paid disproportionally to women's team coaches. This result—that more spending on financial aid for male athletes will result in more spending for female athletes—is pretty much the opposite of what many people have been told to think. But as I hope this simple economic model shows, the naysayers have it all wrong.


Andy Schwarz is an antitrust economist and partner at OSKR, an economic consulting firm specializing in expert witness testimony. Follow him on Twitter, @andyhre.

1 It's hard to see how the current payments that move from the old "GIA" cap to the new "COA" cap could be seen as anything other than financial aid. And so all of the above is almost certainly going to hold true for the first $2,000 to $5,000 of new money. As for the deferred NIL payments, if those payments are not seen as part of "financial aid" under Title IX, it's possible there would be no obligation to match those payments, but the current requirements to match up to COA would not go away.


2 You can think of this as being a situation where current spending on Product W is at or above the equilibrium amount, so that additional spending on Product W is not profitable, if that makes things feel more realistic for you.

3 Note this is different that the world envisioned by Judge Wilken, but I discuss the differences below.


4 If by chance the value of Product M is less than twice the size of the cap, then the basic model will work as above – the highest bidder will outbid everyone (but stay below the cap) and pay half to Product M and half to Product W.

Top image credit: Kevork Djansezian / Getty Images Sport

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