The NCAA Prisoner's Dilemma

Many college look to their sports for an influx of money. Additionally, collegiate basketball and football often bring in so much money that they are exploited to fund other less-profitable sports. Sometimes, however, the profits from football or basketball teams are not enough to save teams like diving. Smaller schools are especially struggling to make up the difference in revenues and expenses to save their athletic programs during this pandemic year. Some may attribute these losses to the high costs of college coaches salaries. In some states, their college coaches are the highest-paid individual in that state. Yet, even large schools like the University of Iowa are considering cutting less-profitable sports because they claim to not have enough funds to cover expenses. I would argue, however, that Iowa has the funds, yet they are allocated to pay their coaches for their popular sports rather than to cover the costs of all of their athletic teams. 

The dominant strategies are varied among universities. For big schools where profits are large for football and basketball, their dominant strategy may be to continue to pay those college coaches large salaries to continue their big payoffs -- if you pay for the best, you continue to attract the best athletes and retain high profits from those programs. Additionally, some teams bring in 0 profits and only incur costs, so it is entirely rational to cut these programs altogether. For smaller schools, however, the dominant strategy might be to cap coaches' salaries because they already operate at a deficit and the only way to lower total expenses may be to cap salaries. Neither of these strategies are Pareto efficient. For big universities, capping salaries may allow for other programs to gain the support they need to succeed and potentially bring in more money for the school. Schools like Duke, for instance, pay their top coaches an exorbitant amount of money considering the average salary of the state -- they can help others without hurting themselves. Cutting their salaries by small percentages would add a significant amount of money to their athletic departments. For smaller schools, capping coaches salaries may indirectly take away from the success of the athletic program if a lesser quality of coach is hired, allowing for even more of a reason to cut a specific program. Therefore the dominant strategy is also not Pareto efficient because it might ultimately hurt their programs. In these ways, collective action through the interpretation or adjustment of anti-trust laws, may bring out a Pareto efficient outcome which caps the college coaches' salaries relative to the profits that that specific sports program creates. If all salaries were capped at proportional rate, smaller schools may be able to cut costs and still maintain to fund most of their sports teams, especially if the athletes (rather than money or titles) are the main focus of the athletic department. Larger schools, too, will likely have more money to support their other less-profitable sports teams if their coaches are willing to take a pay cut.