Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer
47 Pages Posted: 7 Jul 2004 Last revised: 5 May 2025
Abstract
We perform a theoretical and empirical analysis of the impact of transfer fee regulations onprofessional soccer in Europe. Based on a model on the interaction of moral hazard andheterogeneity, we show (i) how the regulations effect contract durations and wages, (ii) thatcontracting parties have an incentive to agree upon inefficiently long contracts, (iii) how theseincentives vary with the legal system, and (iv) how the relationship between contract durationand performance also depends on the legal system. With one exception, all theoreticalresults are empirically confirmed using a comprehensive data set from the top GermanSoccer League ("Bundesliga").
Keywords: Labor contracts, Bosman judgement, empirical contract theory
JEL Classification: J41, L83
Suggested Citation: Suggested Citation
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