The NCAA’S Peculiar Economic System

Abstract

In this chapter, we compare the NCAA Division I basketball league’s economic system to the professional systems discussed in the previous chapter. Comparatively speaking, this league is peculiar as it relies heavily on finding ways to keep fans satisfied compared to hiring the best athletes and creating contests with uncertain outcomes.¹ The Basketball Fund, which is the league’s de facto revenue-sharing plan, and the cartel’s pattern of rule enforcement reveal that the league holds little regard for adopting measures that enhance competitive balance compared with the professional leagues discussed in the previous chapter. Despite the league’s ban on athletes earning direct compensation, Rottenberg’s invariance principle still holds because the recruiting process allows for members to bid up the level of indirect compensation that players receive for enrolling at a particular member school. The ban has proven costly in recent years, as elite players have reduced the amount of time they play in college, an outcome that has harmed the quality of play in Division I basketball and forced the league to place more weight on policies that keep key fan bases satisfied, often to the detriment of competitive balance.