IPL: A case of Principal-Agent Problem


For my uninitiated international friends, IPL, created by the Board of Control for Cricket in India (BCCI) and sanctioned by the International Cricket Council (ICC), is a Twenty20 cricket competition – modeled along the lines of club football in Europe. The best players from around the world play for franchises or clubs as per the market forces.

Given the multitude of stakeholders involved in the IPL, it could be really difficult to identify the true principal-agent relationship. One could argue that there are multiple such relationships. But, the most prominent one is between the BCCI (the cricket governing board) and the franchises. The BCCI is the principal. Its main objective is to develop the cricketing talent in the country and ensure that they are ready to represent India at the international level. BCCI hires franchises to achieve this objective.

Franchise owners may have a conflict of interest though. On one hand, they should perform on BCCI’s main objective to develop the local players by giving such players opportunities to perform and grow. But on the other hand, they must win maximum number of games to attract sponsorships and ticket sales revenue. This conflict of interest, often times, prevents the franchises to do what is best for local players, and in turn for the Indian cricket team. Franchises in the past have reported a dearth of good local players, and that it is impossible for them to develop players in a short IPL window. They focus on recruiting the limited already established players, creating a bigger divide between the players who do well from the ones who are still looking for their opportunity.  BCCI, being a government organization and one that attracted private money from franchises to make IPL a success, is unable to exert its principal authority to discipline the franchises.

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