The Cat's Cradle

"No wonder kids grow up crazy. A cat's cradle is nothing but a bunch of X's between somebody's hands, and little kids look and look and look at all those X's . . . No damn cat, no damn cradle." -- Kurt Vonnegut

Wednesday, October 11, 2006

Coasian Bargaining and the NCAA

King Banian suggests at The Sports Economist that a simple Coasian solution between the NCAA and schools might provide an efficient outcome to the offensive Native American mascot problem. Many of the comments are very good and worth reading. I've reposted my comment below.

I think the problem with a Coasian solution is the property rights and the transaction costs. The negative externality is presumably imposed primarily on the members of the tribes, not the NCAA. Therefore, if the NCAA was not involved and bargaining was costless (no free rider/holdout problem), an efficient solution would be reached between the tribe members and the schools. The direction of the payments would be determined by the court's assignment of property rights.

The first problem is that the NCAA has appropriated the property rights. The externality is not being imposed on or by the NCAA. Thus bargaining between the NCAA and either of the affected parties will not necessarily yield an efficient outcome. The NCAA is effectively a government taking a regulatory approach.

The second problem is that there are many people affected (tribe members), thus bargaining is not costless and we may run into a free rider/holdout problem. A third issue to consider is that, at least in theory, we need perfect information to guarantee an efficient result. In practice we might get to an efficient outcome, but I doubt the parties affected have anything resembling perfect information.


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