Can Regulation Restore Competitive Balance? Evidence from the Football Transfer Market

Diego Rivera-Obón ()
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Diego Rivera-Obón: RITM - Réseaux Innovation Territoires et Mondialisation - Université Paris-Saclay

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Abstract: In 2024, $8.6 billion were spent on football player transfers, raising concerns about fairness and competitive balance as wealthier clubs can more easily acquire top talent. At the same time, clubs increasingly treat player development and trading as a core business activity rather than focusing exclusively on sporting success. This paper develops a structural model of the football transfer market in which clubs optimally choose transfer strategies by jointly considering on-field performance and financial returns under budget constraints and prize incentives. Using real-world data, we show that the transfer market amplifies competitive inequality by benefiting already dominant clubs. We then employ market simulations to evaluate the effects of alternative regulatory regimes, including Financial Fair Play constraints, revenue-sharing mechanisms, and draft-based allocation systems. While tighter budget constraints and more equal revenue distributions slow the growth of inequality, only structural interventions such as a draft are able to improve league parity. By modeling clubs' strategic behavior in a closed setting, this paper shows how market design and regulation shape competitive outcomes, with broader relevance for industrial organization and the regulation of talent-concentrated, winner-take-most environments.

Keywords: Market Structure; Competition; Regulation; Football; Sports Economics; L10; L11; L51; Z21; J44 - Professional Labor Markets and Occupations; Z22; L83 - Sports (search for similar items in EconPapers)
Date: 2026-02-24
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