Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer
47 Pages Posted: 7 Jul 2004
Date Written: June 2004
Abstract
We perform a theoretical and empirical analysis of the impact of transfer fee regulations on professional soccer in Europe. Based on a model of 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).
Keywords: Labor contracts, Bosman judgement, empirical contract theory
JEL Classification: J41, L83
Suggested Citation: Suggested Citation
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