Product Market Competition and Referee Bias

This paper examines whether product market competition constrains biased discretionary decision-making. Using a 28-year panel of National Basketball Association regular-season games, we study whether racial disparities in foul calls vary with the degree of local market competition faced by a player's team. We measure local market concentration using the Herfindahl—Hirschman Index based on the revenue shares of professional sports teams within the same metropolitan statistical area. Exploiting the quasi-random assignment of referees to games, we compare foul calls against black players under officiating crews with different racial compositions across markets with different levels of concentration. We find that in highly concentrated local markets, black players receive 3.28% more personal fouls per 48 minutes when officiated by all-white crews than when officiated by all-black crews. This disparity becomes smaller in more competitive markets. The evidence is consistent with a market-discipline mechanism: competitive pressure appears to reduce the scope for biased discretion in high-stakes decision-making. The results contribute to the literature on product market competition, managerial slack, and implicit bias by showing that market structure may shape not only firm-level outcomes, but also discretionary decisions made by individual agents within organizations.