What's in a Name? Hotelling's Valuation Principle and Business School Namings

Close to 50 prominent business schools have been named in the 1980s and 1990s, in exchange for sizable financial donations. We view the business school naming market as an interesting example of the type of exhaustible resource market examined in Hotelling (1931). When considering an offer, business schools face a trade-off that involves a possible benefit from waiting (the potential to receive a larger gift) against the cost of delay (the opportunity cost of capital). We find that business schools wait to accept a name until the annualized rate of increase in offered gifts is around 5%. This is in keeping with Hotelling's principle and the existence of a functioning market in business school names. We also find that on average, lower ranked schools receive smaller naming gifts and delay their namings longer