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Testing for monopoly rents in the market for playing talent – Evidence from English professional football

Bill Gerrard (Leeds University Business School, Leeds, UK, and)
Steve Dobson (University of West Indies, Trinidad and University of Hull, UK)

Journal of Economic Studies

ISSN: 0144-3585

Article publication date: 1 June 2000

Abstract

Using the team performance‐club profit framework, a formal model is developed of the determination of the transfer fees paid by football clubs when players are traded for cash. It is argued that transfer fees can involve monopoly rents; the selling club extracts a share of the nonnegative differential between its reservation price and the buying club’s maximum bid‐price. It is shown that a necessary condition for the presence of monopoly rents can be established by testing whether buying‐club characteristics are jointly significant determinants of transfer fees after controlling for player characteristics, time effects and selling‐club characteristics. Using a sample of 1,350 English professional football transfer fees covering the period June 1990 to August 1996, it is found that monopoly rents may exist but the degree of monopoly rents may differ with the size of the transfer fee.

Keywords

Citation

Gerrard, B. and Dobson, S. (2000), "Testing for monopoly rents in the market for playing talent – Evidence from English professional football", Journal of Economic Studies, Vol. 27 No. 3, pp. 142-164. https://doi.org/10.1108/01443580010326049

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MCB UP Ltd

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