Wednesday, February 13, 2013
Posted by D. Daniel Sokol
Thomas Peeters (University of Antwerp) & Stefan Szymanski (University of Michigan) describe Vertical restraints in soocer: Financial Fiar Play and the English Premier League.
ABSTRACT: In 2010 UEFA, the governing body of European soccer, announced a set of financial restraints, that clubs must observe when seeking to enter its competitions, notably the UEFA Champions League. We characterize these “Financial Fair Play” (FFP) regulations as a form of vertical restraint and assess their impact on the intensity of competition in the English Premier League. We build a structural empirical model to show that introducing FFP would substantially reduce competition, resulting in lower average payrolls, while average revenues would hardly be affected. Depending on the exact regime, wage to turnover ratios would decline by 8% to 15%.