I think completely open bidding on players will cause more problems. Like I said, you can have teammates in which one is worth millions and the other is worth nothing. They would both be putting in the same amount of work and ostensibly be doing the same job, but one is just drastically better than the other. That might be worse for public perception than them all getting nothing.

I imagine any system of paying players would probably come with both a floor and ceiling for how much a school can compensate a player.

Also this isn't really the point of your comment, but like many athletes Mahomes has never and potentially will never sign a true free market contract with a team. He was drafted by the Chiefs so they had exclusive rights to negotiate with him. His huge extension was negotiated with the Chiefs during his initial contract which means he couldn't field offers from other teams. If he was a true free agent, he would have received even more money. He was willing to take a discount on that value for the added security of signing the contract now and guaranteeing some portion of that money. It is endorsements where someone like Mahomes can see his true free market rate because he can have the Nikes, Adidas, Gatorades, etc of the world competing against each other. Giving college players NIL rights gives them the opportunity to cash in on those free market endorsement deals.