Question

Carefully explain how the NCAA acts as a labor market cartel.

Answer 1

The National Collegiate Athletic Association (NCAA) acts as an association with the purpose of maintaining monopsony power and restricting competition in the market for student-athletes. The activities and the aims of universities in the NCAA are extremely diverted. NCAA runs a controlled cartel whose “profits” go to colleges and coaches, is not a private cartel but one backed by government force. NCAA acts collusively while dealings with student athletes organize and monitor their conduct. Collusive monopsony economic theory provides an excellent description of the behavior of the NCAA and its members. IF competition for players operate freely, the competition for players would stiffen, would severely eat into the profits made by colleges from the big time sports. To avoid competition, NCAA sharply limits the number of athletic scholarships, and limits the size of the scholarships that schools can offer the best players. NCAA acts as a labor market cartel constrains competition among schools for players. The NCAA main purpose is to prevent exploitation of student-athletes, creates a equitable system of recruitment. These rules make many colleges to maintain football and basketball programs and help actively to search athletes. In this way NCAA acts as a labor market cartel.