84th International Atlantic Economic Conference

October 05 - 08, 2017 | Montreal, Canada

Do you get what you pay for? The case of transfer fees for players in the German Bundesliga

Friday, 6 October 2017: 9:00 AM
Eleanor T. von Ende, Ph.D , Economics, Texas Tech University, Lubbock, TX
Klaus G. Becker, Ph.D , Economics, Texas Tech University, Lubbock, TX
Previous empirical studies regarding the economics of European football clubs have concluded that these clubs can be viewed as win, rather than profit maximizers. In addition, there appears to be a well-established relationship between team success and player spending, as well as team success and team revenues. In this paper, we take a different approach and analyze specifically how successful clubs in the German Bundesliga are operating in the transfer market for players. Because of specific regulations and governance of the league which put financial stability and promoting growth at the forefront, Bundesliga clubs are constrained in their transfer activities. These constraints provide an incentive to only engage in transfers that not only promise to increase the quality of the team, but are also financially viable.

Data was compiled from several sources, including the European Club Association’s “Study on the Transfer System in Europe”, the Union of European Football Associations' “European Club Licensing Benchmark Report”, as well as data from www.transfermarkt.de (an online website that posts changes in a player’s market value on a weekly basis as well as transfer fees paid for players) and several other sources that publish data relevant to the determination of a player’s market value and marginal revenue product. In 2016 the “net transfer” (transfer expenditures – transfer income for the 18 Bundesliga clubs) was 48.26 million euros.

Comparing the transfer money paid for players that were bought by the clubs at the beginning of the 2016/17 season with the estimated market value of the players at the end of the season, and also taking into account the club’s success in the league as well as various other competitions they participated in (German Cup, Union of European Football Associations Champions League) allows us to determine how successful a particular club was in the transfer market that proceeded the season. In particular we calculate both the marginal cost and the marginal revenue product for individual players as well as for each of the 18 Bundesliga clubs. Comparing the two allows us to evaluate how successful a club was in the transfer market.