Market Power

Musings by an academic economist on the power of markets and the power over markets.

Tuesday, November 09, 2004

NCAA Market Power

Monopolies produce less output than competitive markets. What happens when a monopolistic firm loses its market power? Output in the market tends to increase.

How many college football games were on TV during the first week of November in 1984? How many were on last weekend?

Because of the way the Supreme Court ruled in the 1984 case “Board of Regents of the University of Oklahoma vs. National Collegiate Athletic Association”, you can watch dozens of college football games each week. Compare that to a weekend in 1981 as described in this article in the Minneapolis Star-Tribune:

“For instance, on one weekend in 1981, an Oklahoma-Southern California game aired nationally on ABC while a Citadel-Appalachian State game was shown regionally on four channels. Both games garnered the same payout for all four schools.”

This is an excellent example of how a firm with market power restricts output and what happens to market output when the market power is restricted.