Productivity, Rents, and the Salaries of Group of Five Football Coaches

Abstract

Standard labor market theory says that workers are paid their marginal revenue product (MRP). However, firm revenue is sometimes independent of the productivity of individual workers. This often occurs in professional sports, as the bulk of a team’s revenue comes from league-wide TV contracts negotiated years in advance. This is also true for head coaches at “Group of Five” schools, which form the second tier of college football programs. We show that a coach’s performance affects both his MRP and his bargaining power over the division of exogenous rents that accrue to his program.