An Economic Analysis of Cartel Behavior Within the NCAA

Abstract

The goal of this paper was to analyze the cartel behavior of the National Collegiate Athletic Association. The NCAA, with over 1,000 members, has overseen intercollegiate athletic competition and established rules of play. In addition, the NCAA has maintained a cartel agreement to maximize profits for its members. However, to maintain a cartel, the expected costs of violating the agreement must be greater than the expected benefits of violation. Within this paper, an economic model using NCAA Division I men's basketball tournament revenue data was developed to determine when teams had an incentive to violate the cartel agreement—that is, commit a rules violation. Tournament revenue data from 1982 to 1990 was obtained for teams in six conferences (Big East, Big 10, Pacific 10, Southeastern; Atlantic Coast, and Big 8). The economic model revealed that teams in the Big East, Big 10, and Pacific 10 conferences had the greatest financial incentive to violate NCAA regulations. The information provided in this paper may be useful to intercollegiate athletic administrators who attempt to reduce the occurrence of rules violations and strengthen the cartel.