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Game Theory Breakdown of the English Premier League

Within the global scope of soccer, teams within FIFA regulated leagues are ensured at least 12 weeks where management may acquire, loan, or release players during this time. All teams compete for players in a global transfer market where deals are typically made by offering a transfer fee to trade a player to another team as well as a lucrative weekly salary to the player. Leagues such as the English Premier League host matches between major powerhouses in the world of soccer including Manchester City, Manchester United, Chelsea, Arsenal, Liverpool, and Tottenham. Serie A in Italy, the Bundesliga in Germany, and La Liga in Spain all have their top teams as well in a competitive dog fight to win the league. The coaches of these teams often turn to the transfer market as a means of securing top players and prospects to increase their chances in winning the league and other international competitions. For the purpose of this blog, the summer transfer window of the English Premier League will be analyzed.

Within the English Premier League, there are a handful of teams that dominate the league with the quality of their players, fame from tournaments and previous league titles, and especially transfer funds. Just this summer, over 1.24 billion Euros were spent by teams of the English Premier League with Liverpool, Chelsea, Fulham, and Watford all breaking 100 million Euros each. The English Premier League is a joy to watch because it is considered the most competitive league based on the raw talent of each team. The unfortunate aspect is that larger teams like Liverpool, Chelsea, and Manchester City tend to consistently dominate the league with transfers for future stars and already elite players due to their pull. Improving a team through the development of young players is a way that team can invoke a dynasty, but smaller teams find difficulty competing with the lure from larger teams.

Game theory can be directly applied when a future prospect considers the options between two bidding teams, which for this example when we consider bidding between a large team like Chelsea and a smaller team such as Watford. Considering both teams spend the same transfer fee, the young star can either choose a contract from a team that will make a strong running for the league title but will give him reduced playing time, or he may accept the smaller team to develop his skills more and earn more playing time rather than seeking fame initially. In most cases, the larger team has the financial backing to outbid a smaller team if the player is deemed worth the money, but without considering finances the player’s choice is often skewed to signing with the larger team due to the personal benefits from game theory.

In the case of Chelsea, there are currently 38 developing players owned by Chelsea and set out on loan to other teams. Most of the top clubs in the English Premier League boast similar numbers, but this implies that Chelsea has a larger chance of profiting with a future star than smaller teams and has a greater market share with regards to the global soccer talent pool. When a smaller team develops or acquires talent, a larger team can make a lucrative offer to entice that player to join the team. The smaller teams can still opt to refuse negotiations and keep the player on the team until the end of their contract, but after that time period other teams can submit transfer offers. The structure of game theory in these transfers leads to a general trend of talented prospects sifting through larger clubs, where they pick out the best and benefit with greater success in the league. This in turn leads to a localisation of talent to larger teams, while effectively starving smaller teams and creating a stratification in the league with regards to overall talent: the rich get richer and the poor gets poorer in a sense. The underlying game theory behind player’s decisions when signing contracts is a motivating factor behind why these large teams have remained at the top for so long, and why teams like Leicester, Watford, and Bolton are never expected to win a league, but somehow Leicester managed to win it all despite enormous odds.

The Economics Of The Transfer Market



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September 2018