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Why football players may benefit from the "shadow of the transfer system"

  • Helmut Dietl
  • Egon Franck
  • Markus Lang

    ()

    (Institute for Strategy and Business Economics, University of Zurich
    Institute for Strategy and Business Economics, University of Zurich
    Institute for Strategy and Business Economics, University of Zurich)

The transfer system imposed by the football governing bodies on employment relations made sure that a player could not leave his current club and sign with another club without the current club's explicit consent. The 1995 Bosman judgement of the European Court of Justice declaring football players to free agents after expiration of their contracts and the 2001 intervention of the European Commission, which, among other things, limited contract durations in football, can be interpreted as the two major steps towards restricting the application of the transfer system. Based on a bargaining model with stochastic player productivity, we show that less restrictive transfer rules reallocate ex post bargaining power from players to clubs. This reallocation is efficient and in the ex ante self-interest of players. The right to charge transfer fees enables clubs to insure their players. The players, in turn, benefit by converting risky future income into riskless current income. Overall, player utility is higher under more than under less restrictive transfer rules.

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File URL: http://repec.business.uzh.ch/RePEc/rsd/CRSA_WPS/13_CRSA_full.pdf
File Function: First version, 2006
Download Restriction: no

Paper provided by University of Zurich, Center for Research in Sports Administration (CRSA) in its series Working Papers with number 0013.

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Length: 25 pages
Date of creation: 2006
Date of revision: 2007
Handle: RePEc:rsd:wpaper:0013
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  1. Oriol Carbonell-Nicolau & Diego Comin, 2005. "Testing out Contractual Incompleteness: Evidence from Soccer," NBER Working Papers 11110, National Bureau of Economic Research, Inc.
  2. Peter Antonioni & John Cubbin, 2000. "The Bosman Ruling and the Emergence of a Single Market in Soccer Talent," European Journal of Law and Economics, Springer, vol. 9(2), pages 157-173, March.
  3. Eberhard Feess & Gerd Mühlheußer, 2002. "Economic Consequences of Transfer Fee Regulations in European Football," European Journal of Law and Economics, Springer, vol. 13(3), pages 221-237, May.
  4. Feess, Eberhard & Frick, Bernd & Muehlheusser, Gerd, 2004. "Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer," IZA Discussion Papers 1180, Institute for the Study of Labor (IZA).
  5. Feess, Eberhard & Muehlheusser, Gerd, 2002. "Transfer Fee Regulations in European Football," IZA Discussion Papers 423, Institute for the Study of Labor (IZA).
  6. Bernd Frick & Gunnar Pietzner & Joachim Prinz, 2007. "Career Duration a Competitive Environment: The Labor Market for Soccer Players in Germany," Eastern Economic Journal, Eastern Economic Association, vol. 33(3), pages 429-442, Summer.
  7. Oliver E. Williamson, 2003. "Examining economic organization through the lens of contract," Industrial and Corporate Change, Oxford University Press, vol. 12(4), pages 917-942, August.
  8. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-30, December.
  9. Burguet, Roberto & Caminal, Ramon & Matutes, Carmen, 1999. "Golden Cages for Showy Birds: Optimal Switching Costs in Labour Markets," CEPR Discussion Papers 2070, C.E.P.R. Discussion Papers.
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