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Contracts As Rent‐Seeking Devices: Evidence From German Soccer

Author

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  • Eberhard Feess
  • Michael Gerfin
  • Gerd Muehlheusser

Abstract

Recent theoretical research has identified many ways how contracts can be used as rent‐seeking devices vis‐à‐vis third parties, but there is no empirical evidence on this issue so far. To test some basic qualitative properties of this literature, we develop a theoretical and empirical framework in the context of European professional soccer where (incumbent) teams and players sign binding contracts which, however, are frequently renegotiated when other teams (entrants) want to hire the player. Because they weaken entrants in renegotiations, long‐term contracts are useful rent‐seeking devices for the contracting parties. However, they reduce the likelihood of (mutually beneficial) transfers, which generates a trade‐off in the spirit of Aghion and Bolton (1987). Using a data set from the German “Bundesliga,” our model predictions are broadly confirmed. (JEL L14, J63, L40, L83)

Suggested Citation

  • Eberhard Feess & Michael Gerfin & Gerd Muehlheusser, 2015. "Contracts As Rent‐Seeking Devices: Evidence From German Soccer," Economic Inquiry, Western Economic Association International, vol. 53(1), pages 714-730, January.
    • Handle: RePEc:bla:ecinqu:v:53:y:2015:i:1:p:714-730
    DOI: 10.1111/ecin.12098
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    Cited by:

    1. Claudia M. Landeo & Kathryn E. Spier, 2016. "Stipulated Damages as a Rent-Extraction Mechanism: Experimental Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(2), pages 235-273, June.
    2. Hoey, Sam & Peeters, Thomas & Principe, Francesco, 2021. "The transfer system in European football: A pro-competitive no-poaching agreement?," International Journal of Industrial Organization, Elsevier, vol. 75(C).
    3. Babatunde Buraimo & Bernd Frick & Michael Hickfang & Rob Simmons, 2015. "The Economics of Long-term Contracts in the Footballers' Labour Market," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(1), pages 8-24, February.
    4. Karol Kempa, 2022. "Task-specific human capital and returns to specialization: evidence from association football [All about balance? A test of the jack-of-all-trades theory using military enlistment data]," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 136-154.
    5. Luca Fumarco & Neil Longley & Alberto Palermo & Giambattista Rossi, 2024. "Strategic behaviours in a labour market with mobility-restricting contractual provisions: evidence from the National Hockey League," Oxford Economic Papers, Oxford University Press, vol. 76(4), pages 1189-1203.
    6. Barth, Michael & Emrich, Eike & Daumann, Frank, 2017. "Evaluation of sporting success in Austria: An institutional economics analysis," Working Papers of the European Institute for Socioeconomics 20, European Institute for Socioeconomics (EIS), Saarbrücken.
    7. Furmaco, L. & Longley, N. & Palermo, A. & Rossi, G., 2021. "Employees’ Performance Variation over Fixed-Term Contracts - Evidence from the National Hockey League," Working Papers 2107, Tulane University, Department of Economics.
    8. Jonathan R. Peterson, 2023. "Employee bonding and turnover efficiency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 223-244, January.

    More about this item

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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