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Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer

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  • Eberhard Feess
  • Bernd Frick
  • Gerd Muehlheusser

Abstract

We perform a theoretical and empirical analysis of the impact of transfer fee regulations on professional soccer in Europe. Based on a model on the interaction of moral hazard and heterogeneity, we show (i) how the regulations effect contract durations and wages, (ii) that contracting parties have an incentive to agree upon inefficiently long contracts, (iii) how these incentives vary with the legal system, and (iv) how the relationship between contract duration and performance also depends on the legal system. With one exception, all theoretical results are empirically confirmed using a comprehensive data set from the top German Soccer League ("Bundesliga").

Suggested Citation

  • Eberhard Feess & Bernd Frick & Gerd Muehlheusser, 2004. "Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer," Diskussionsschriften dp0411, Universitaet Bern, Departement Volkswirtschaft.
  • Handle: RePEc:ube:dpvwib:dp0411
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Helmut Dietl & Egon Franck & Markus Lang, 2008. "Why football players may benefit from the ‘shadow of the transfer system’," European Journal of Law and Economics, Springer, pages 419-419.
    3. Frick, Bernd, 2012. "Die Entlohnung von Fußball-Profis: Ist die vielfach kritisierte 'Gehaltsexplosion' ökonomisch erklärbar?," Edition HWWI: Chapters,in: Sport und Sportgroßveranstaltungen in Europa - zwischen Zentralstaat und Regionen, pages 79-110 Hamburg Institute of International Economics (HWWI).

    More about this item

    Keywords

    regulation of labor markets; long-term contracts; sports economics; breach of contract; empirical contract theory;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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