Legal Restrictions on Buyout Fees: Theory and Evidence from German Soccer

Eberhard Feess, Bernd Frick and Gerd Muehlheusser

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: We perform a theoretical and empirical analysis of the impact of transfer fee regulations on professional soccer in Europe. Based on a model on 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: regulation of labor markets; long-term contracts; sports economics; breach of contract; empirical contract theory (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc
Date: 2004-06
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Persistent link: http://EconPapers.repec.org/RePEc:ube:dpvwib:dp0411

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