Game Theory in the Soccer Transfer Market: Assessing Player Acquisition Strategies by Clubs in Top European Leagues
The transfer window in soccer is the period where clubs are allowed to acquire new players, either from other clubs or as free agents. In the 5 largest European leagues, this is typically allowed in the month of January as well as the months of July and August. Usually, when clubs negotiate player transfers, the buying club bids a sum of money that the player’s current club may choose to accept or reject. In some cases, player’s have a release clause in their contracts, which essentially specifies a minimum sum of money that the selling club cannot reject for the player. If these conditions are met, then the player is allowed to negotiate personal terms such as wages and bonuses with the buying club.
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Due to ever-growing revenue and global popularity, transfer prices have skyrocketed in recent years. There are a multitude of models of acquisition that vary by club revenue, ownership, and coaching among other factors. Pundits and fans alike dispute the correlation of club success with money spent: history shows that the clubs that spend most do in fact climb into the upper echelons of competitive soccer, but may find themselves inferior to the continental elite. For example, between 2011 and 2016, the French club Paris St. Germain spent over $600 million on superstars such as Zlatan Ibrahimovic, Edinson Cavani, Angel Di Maria, and Thiago Silva, but did not reach the semifinal stage of the Champions League (the most prestigious European club competition) even once in this period. However, they dominated their domestic league, winning 4 titles: they were clearly the best team in France but were not quite as strong as other elite European clubs. From a game theoretical perspective, it’s important to consider the impact of such an expensive strategy on other clubs. PSG’s case is contrasted with their rival club in France AS Monaco, who also spent exorbitantly in the past. However, the club won the most recent edition of the French league relying heavily on young talent that was developed in Monaco instead of being bought elsewhere, showing that large-spending is not necessarily a dominant strategy for all teams. Indeed, Monaco will stand to make over $200 million from the sale of a single player, Kylian Mbappe, to PSG. Like the article mentions, some clubs prefer this strategy- development of youth to sell for high prices in the future. Two of the teams the author mentioned, Atletico Madrid and Borussia Dortmund, have reached the finals of the Champions League between 2011 and 2016 (twice in Atletico’s case, in 2014 and 2016).
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Now we consider the other teams that have been most successful in the Champions League between 2011 and 2016: Real Madrid, Juventus, Bayern Munich, and Barcelona. These teams, along with Atletico, form the top 5 teams in the UEFA Club Rankings Coefficients, which ranks European teams by their success in continental club competitions, with heavy priority given to the Champions League. These teams are among the most valuable across the sports world and generate enormous revenue, and each has spent large sums of money on some of the most recognizable soccer players in the world, like Neymar, Luis Suarez, Cristiano Ronaldo, Gareth Bale, Gonzalo Higuain, and Manuel Neuer. However, it seems that these clubs have pursued a strategy that is different from PSG’s even though they may have similar financial strength. The most obvious example of a transformed player acquisition strategy leading to success is Real Madrid. The Spanish club have made history by winning 3 of the past 4 Champions League trophies, with a squad composed of a mixture of experienced, big-money buys and developed talents. In the past, however, the club were famous for their “Galactico” policy, buying players like Ronaldo, Figo, Zidane, and Beckham in the early 2000s as well as Kaka, Ronaldo, and Benzema in 2009. However, Real endured a period of stagnation in which they did not win the Champions League between 2002 and 2014, losing the domestic title to rivals Barcelona 8 times in the same period. It is worth mentioning that Barcelona won the Champions League thrice between 2002 and 2014, with a squad that was composed primarily of homegrown talent with some big-money reinforcements (such as David Villa). While it’s incorrect to say one team was better purely due to transfer strategies, it seems that Real’s shifted focus towards player development reaped a better payoff in the short run once that change was made: since 2014, key Madrid players such as Sergio Ramos, Marcelo, Dani Carvajal, Isco, and Casemiro were developed at the club while expensive acquisitions like Ronaldo and Bale continued to play a key part. This lends credence to the fact that player acquisition may not be as profitable a strategy as thought .
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There are certainly more than two strategies in considering the economics of the transfer market. Teams with fewer resources are forced to develop young players and sell at a higher price, as described by the article. In European leagues, the worst teams at the end of the season drop down to the second division, which can be devastating to club finances and morale. After all, marketing and sponsorship revenue for lower leagues is a fraction of that for the top leagues. These smaller teams are not pursuing championships but are instead focused on retaining their present status. The growing income of top teams creates a divide that reinforces the need for these teams to stick to a safe strategy that emphasizes long term financial growth and stability over short-term rewards. So, an equilibrium is present in the smaller teams of a league in which the dominant strategy for most teams is basically to spend their more limited earnings with a focus on growth, by increasing revenue in the long run and improving incrementally. Examples of this include Swansea and Southampton, teams that played lower league soccer (as low as the fourth tier in Swansea’s case), earned promotion, invested in quality player acquisitions, and ultimately ended up playing in the Europa League, the “little brother” to the Champions League. In these cases, it seems that the same general strategy can be observed among multiple clubs.
It is important to have a more nuanced understanding of the game theoretical framework in question. In truth, payoff cannot be measured accurately by trophies won or increased revenue in a short period of time. Teams can gain marginal benefits from acquiring players beyond those obvious rewards, including brand exposure, leadership, and experience. Also, strategies formed by teams are not rigid such that a team sticks to one strategy for every decision regarding player transfers. Nevertheless, the generalized transfer strategies among teams in top European leagues present an interesting case study for some of the fundamental tenets of game theory which we have covered in lecture.