Market Power

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

Monday, December 20, 2004

New College Basketball Arenas

The University of Missouri's basketball programs are playing this season's games in the brand new $75 million Mizzou Arena (formerly knows as Paige Sports Arena). Today's St. Louis Post-Dispatch has this interesting article about new basketball arenas on college campuses.

Proponents often point to positional externalities as a reason for the construction of a new facility or the renovation of an old arena: Our school needs one because the schools we compete with have them – kind of like why steroids permeate sports. A quote:

“"It's obviously a big boost for us, something we needed to do to stay competitive," said Tim Hickman, MU's associate athletics director of operations.”

The University of Illinois is looking to get a new basketball arena. Why, because ol’ Mizzou got one:

“’In the long run, I think it would be for the best (for Illinois to build a new facility)," Illini basketball coach Bruce Weber said. "The big thing is to not get left behind, because now you do have Missouri getting one, they're obviously one of our rivals. If we wait two or three years and nothing happens, then I think we're doing ourselves a disservice’."

One angle is that new and renovated facilities can help bring in good recruits:

“Why are universities so willing to roll the dice? One reason is that the newness of the facilities and their high visibility can lure top recruits to campus.”

I’d bet that the existence of a new building would not be a big reason why most players choose a particular school. New arenas might make the difference in some particular cases. But most mens' players have dreams of playing in the NBA and the building in which they play, old or new, isn’t going to give them the necessary training to make it to the next level.

Luring top coaches is another matter.

“It's difficult to quantify how many recruits actually base their college choice on a building. But at least one coach took a job based partly on having a new arena.”

That would be Bobby Knight of the Texas Tech Red Raiders.

The new arenas, and their new sources of revenue, allow schools to compete for the better coaches who can then lure in the top recruits. Think of two of the top NCAA Division I programs: Kansas, and Duke. Both programs play in an old building (the Post-Dispatch says here that their arenas are two of the top 5 old barns still in use). But year in and year out, these schools are consistently in the top echelon. The difference makers are the coaches that prowl the sidelines.

Mizzou’s arena is a beautiful facility and it is going to generate a lot of new revenue for the athletic department. There are massive restrictions on compensating players, but not so when it comes to compensating coaches or the athletic department bureaucracy. I wonder how its officials will spend the new cash.