Does it make economic sense for only some universities in a certain area to pay their sports scholars?

Question

Apparently

‘Athletic scholarships are common in the United States, but in many countries they are rare or non-existent.’

But are there countries where there are some universities that offer sports scholarships while other universities in the same country don't? We can shrink country to city, town, district, etc if you like (Note 2). I'll just say 'area'.

I have this relative: My relative and I are expats living in a certain area but permanent residents of the area. My relative recently got accepted into a first world university for an undergraduate degree in engineering and was accepted as a sports scholar...sort of.

None of the tuition is waived. The only thing my relative gets is a reduced fee to be on the team: Yeah, the university charges its students a fee to be on the team. My relative also gets lower grade requirements in admissions or retention, but my relative does not need that due to having outstanding grades in secondary. I figured this was a practice in this area where we both live and where we are both expats (see quote above).

However, I found out that several universities in this area apparently do offer sports scholarships ranging from 50-100% off tuition. One of the universities that offer is even of a lower QS ranking than the university that my relative is attending (Note 1). This to me seems like a big misunderstanding on my part, so I've emailed the university, although my relative has already asked, just to get first hand confirmation.

In the mean time: Why would anyone play sports for a university against other universities but not get paid or get tuition waived for the playing?

Some guesses:

1. Lower admission grade requirement
2. Lower retention grade requirement
3. Admission or retention for dormitory requirement
4. Possibility of future scholarships
5. Prospects of a sports-related careers after graduation that include but are not limited to professional sports

The thing is none of my guesses explain why those universities apparently have sports scholarships that waive tuition at least partly while this university doesn’t. Why wouldn’t sports scholars from a university that doesn't pay their sports scholars just transfer to another university in the next year thus causing the university to lose in inter-school competitions?

(Note 1): My relative applied to all universities in our area for sports scholarships and was rejected for all but this university. Also, our area has less than 10 universities, and they're all in the QS... Wait, lemme check...Yeah, ACTUALLY, my relative's university has the highest world QS ranking in our area. Meanwhile, the university with the lowest world QS ranking in our area has sports scholarships. Also, all universities in question are in the top 100 in our continent's world QS ranking, our continent is not Africa, and my relative's university is not the highest in our area for our continent's world QS ranking.

(Note 2): I'm thinking perhaps of a possibility where, say, in North America or Europe this might be the case but is not the case for a specific state or city or something like Massachusetts, Boston, UK or London. You can shrink as much as you want on the condition that universities in your shrunken area compete with each other in sports.

Answer 1

I mean, even in the US, the ability of a school to offer sports scholarships is determined by what athletic conference(/division) they belong to: Division III schools are forbidden from offering athletic scholarships. (So in that regard- it can vary even at the city level. Boston has some schools that give athletic scholarships, and some that don't). In fact, in that example, Northeastern University provides athletic scholarships, but three blocks away is Wentworth Institute of Technology that doesn't.

As far as why would someone play a sport without the possibility of scholarship? For some, I'm sure it's the potential for a future athletic scholarship (for example, many US football players will play their first couple of seasons for a community college in the hopes of attracting attention from NCAA Division I programs). For others, I'd guess the potential of going pro- if you didn't get offered a spot on a team that provides athletic scholarships, this might be your only chance to improve and try out for a pro team later.

But for most, I'd guess it's probably because they enjoy it. Many US schools have club teams in many sports, which compete against local schools and offer no real chance for financial returns. Moreover, why do so many students participate in other competitive extra curricular activities? I'd guess the same reason.

Answer 2

The question posed as I currently understand it is, "What determines whether schools subsidize undergraduate varsity athletes?

The best way to economically approach this question is to consider the different schools as firms giving "on the job training" to the student athletes. They help improve two types of human capital for the student. Specialized studies for a major and sports proficiency have varying levels of "firm specificity".

If a firm and laborer would both benefit from training, then who should bear the cost of providing that training? If the firm pays the cost of all the training, then what is to stop the employee from being able to switch to another company? If the laborer provides the entire cost of training, what stops the company from not offering a higher wage after the training?

So usually, both the laborer and the firm will provide some of the cost of training. If the training skills are easily transferable between different firms (general human capital), then the laborer will pay a greater burden of the costs. If the training skills are not easily transferable between different firms (firm-specific human capital), then the firm will pay more of the costs of training. This helps to reduce the chance of someone being trained and one party not getting the return on investment for the training.

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Consider then that schools can produce a spectrum of two variables. Good students, and good athletes, and mixes of both proficiencies are what differentiate students. Different schools will focus on different "products" and that will change how profitable it is to put money into different types of training as well. Note that in a sense with this analogy, the laborers are the goods being produced, so trying to figure out how the marginal product and marginal cost entangle with each other is not a trivial feat.

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What affects how much a school pays for athletic training is a complicated issue. There are many other questions embedded within it. If a school provides higher quality athletic training, does that make the skills it teaches more transferable (you can take your training to a different school now that you know the tricks) so that other schools can provide a better offer? Or does it make the skill less transferable (working with a good team you have lots of camaraderie with and then suddenly switching makes things hard to switch)?

At the end of the day though, the take away is that most schools don't fully subsidize education or athletic training because it is expensive. School places you in debt in hopes of a hopefully higher wage later on. In order to fully answer your question above, you have to answer a lot of smaller questions about the nature of the education market in general; ultimately, the scope of this above question is really broad.