Valuation of Football Players
Football is one of the biggest sports played in the world. The wages and income are significant sources of controversy. To understand this, you have to study different variables in Economic Analysis. Different newspapers usually report a record of the financial status of the different players, including the transfer deal. The financial income of a player is based on the characteristic’s performance of the player in previous years. For instance, Cristiano Ronaldo received a deal from Real Madrid worth €76m. The deal received criticism from the UEFA president and the FC Barcelona, who claimed that the transfer fees were damaging football, and no player was worth such an amount. After a year, Ronaldo showed profitability by generating €200m for Real Madrid through publicity and advertising. The player receives a wage bill of more than €10m. Jamie Vardy is a player of Leicester city. The club invested mostly in new players, which led to the fall of the club. Jamie is a player who was born in the UK. His annual salary totals to £ 7.280.000 in the year 2019.
When considering the worth of a player, it is essential to calculate the value-added or value lost. The value added by a player should be greater than the value lost. This condition can be estimated by calculating the inequality with an unknown variable;
IR-SBC >DR – S SC
= >
SBC < IR-DR + SSC
Where; IR is increased revenue of the player, DR is decreased revenue, Ssc is the player salary in the club selling. The Sbc is determined by other variables that are equal or greater to zero.
Literature review
Various researchers have explained why the price of a football player is very high. They all fell under the same argument. The value of a player is capitalized by the team which owns his contract. The value is not more than what other teams’ players are capitalized. Carmichael (1993) described a situation of the players in a team. He used the empirical method of Nash bargaining solutions to identify the fee of a player in a given team. F* maximizes the increment utility of player.;
[S(f) – s] [B (f) – b],
where s and B are expected utility functions of the players worth. Whereas s and b are the status quo or threat points. The Nash bargaining model is appropriately used to elaborate on important factors that determine the outcome of the English player’s team. The worth of a player is determined by the size of the club and the success of the player’s team.
Pujol and Garcia-del-Barro (2007) conducted a study using data from top divisions. They focused on the worth of the wage of a player after the club decides the net worth of the player. They examined the bargaining power of a club from selling a player in a given setting. They say that the labor of football contains different groups of players. The first group of players is the average player who is known to be abundant, and the superstars who are few. The economic theory explains that clubs should extract monopsony rents chosen from different players. Many clubs are in the urge to hire a superstar. Such moves have led to monopoly power in the market labor and lead to the extraction of monopoly rents. The superstars have a high net worth compared to the low players. The rich teams can pay the superstars while the poor clubs obtain low players. The players then create a platform where players get paid in the contribution of sporting while merchandising the contribution.
Dobson and Gerrard (2010) used the football clubs’ arguments, where they focus on the extraction of monopsony rent. The value of a player in a team is the marginal value of a player and the wages to be paid for. The fees of a player depend on the player’s characteristics in a team. The empirical data in the monopoly of evidence of the player’s fee in the monopoly rent is extracted in selling and buying. The fee of a player’s transfer is minimum, but it does not get the mechanisms in a degree in monopoly rents. The club’s financial status determines the financial stability of each player.
The literature also focuses on the Bosman ruling that explains the price of a player and the wages in incentives in players. Rottenbergs (2012) emphasizes on the economics of sports. He introduced the principle of invariance, explaining the models for football club behaviors. The talent of a player is efficient in free system markets. The players get their fee in market values under the Bosman system. Pronouncements in the world of soccer are used in Bosman judgment that belief players cannot be transferred in any circumstances. The Bosman verdict led the experts in developing players concerned with players verdict.