Game Theory in Football Transfer Markets

How Billions of Dollars move in the world’s biggest sport

The “Transfer Window” is an unofficial term used by the media and the public to refer to a window of time when football clubs are allowed to acquire new players, as well as release ones that are not required. Clubs trade between each other using money and/or other players as a medium; this mechanism being called the transfer market. In most of the major European leagues, this window opens once after the end of the season from July to the end of August, with England and France opening their windows in mid-June. Initially, the club deciding to buy agrees personal conditions with the player, and then approaches the selling club and negotiations are started. If agreed, the deal is done and the player registers for his/her new club.

However simple this may seem; a whole lot of thought goes into every deal. The selling club looks to wring out every bit of profit from the deal, while the buyer wishes to not just complete the deal in the cheapest amount possible but also in the quickest manner possible. The reason:

Benefits of a quick deal:

When a club approaches a player, news inevitably leaks out This may be due to a journalist paid by a 3rd party to pay attention to the particular club/player, the selling club wanting to draw out more bids, or the player’s agent seeking more suitors for his client. Supposedly, a big club like Manchester United(referred to as United) wishes to buy a genius young player A from, say, Paris Saint-Germain (PSG). Now, 3 things can be the reason for the news leaking out. Which are:

1. Domestic Rival: A domestic rival of Manchester United like Liverpool wishes to keep a tab on United’s transfer movements. They can pay a journalist to do so, and to prevent United from acquiring the player; news is leaked so that United has competition from other clubs.
2. PSG wishing to get more money: PSG believes that its player is worth more than United are offering them. Therefore, they leak the news to have a chance that someone might offer more, say, Inter Milan.
3. Player A wanting better terms: A wishes to leave PSG, but they don’t like the contract terms being offered by United. Their agent leaks reports and details of the deal, thereby allowing other clubs to make an approach which is more favorable to the player.

Therefore, a quick deal is almost always favorable to the purchasing club.

There aren’t a huge number of factors that decide which move occurs, and which doesn’t, but there are still a sizable number of things to look at. Which are:

1. The future of the player at the old club: Is the player a crucial player, a squad rotation player, or an unused player? Are they satisfied with the playing time they are getting? Do they wish to stay? Does the club wish for them to stay?
2. The future of the player at the new club: Will the player be significantly better paid at the new club? Will they be able to perform a useful role that would allow their career to progress, or will they become an injury cover to one of the main players?
3. The future of the clubs: Which club is more likely to win a major trophy in the future? Or in the case of 2 minor clubs, which is less likely to face relegation?

The player decides to factor everything and strike a balance. Like in the Jadon Sancho transfer saga, the player moved to Manchester United from Borussia Dortmund. His probable reasons:

1. Manchester United were offering far more wages than he was receiving at Dortmund.
2. The player was looking to move to his home country, England. He was also more likely to be noticed quickly by the national team coach.
3. Manchester United, under their new manager Ole Gunnar Solskjaer, had finished 2nd in the English Premier League (EPL) for the first time in a while after a late rally and the mid-season return of Cristiano Ronaldo, one of the greatest players of all time, and a man who had once been United’s greatest pride. United were looking the best they had been in recent seasons, with Bruno Fernandes not putting a foot wrong, Fred and Scott McTominay surprisingly being decent in central midfield, and Marcus Rashford and Mason Greenwood lighting up the park.
4. Dortmund had once again ended up in its customary 2nd position in the Bundesliga; and finishing 2nd in the EPL is far more of an achievement than finishing 2nd in the usual 2 horse race that is the Bundesliga.
5. Manchester United were in dire need of a star winger, and Sancho was all but guaranteed to be a starter at United, just like he had been at Dortmund.

Jadon Sancho with the then United coach Ole Gunnar Solskjaer

Therefore, it was all but confirmed that Sancho would accept the deal the moment it was reported in the news. It didn’t hurt that United were willing to accept the high transfer fees demanded by Dortmund, which was estimated at 73 million pounds.

Here, we see how expensive it can be to sign star players, especially if they are young. As players get older, their market value decreases exponentially after the age of 27 to 28. Also, there is a catch: Players can only be traded if their contracts are active. Once the contract expires, any club can sign them without paying a penny to the original club!!! This also causes a certain dilemma for clubs with players who are in the final year of their contract: Stick to the value of the player and risk them leaving for free next summer? Or let them leave for a loss now?

Transfer Policies and Club Success: Hand in Hand

We have seen that the acquisition of top young players is very demanding in terms of financials as well as club success probability. This means that small clubs such as Watford and QPR are unable to spend on top young players. They have to bank on their own youth academies and small scout networks to acquire players, and they are generally not enough. Therefore, these clubs try to acquire new seeds from major clubs’ academies on loan deals. The major clubs are also happy because their young players, who wouldn’t be getting much game time at the big clubs, can now get experience and show their real worth. Here are some players who shone after being loaned out from EPL clubs to 2nd tier clubs:

• Harry Kane
• Mason Mount
• Emile-Smith Rowe
• Emiliano Martinez
• Jesse Lingard

Surprisingly high profile, aren’t they? This goes on to show how beneficial the loan system really is.

This isn’t the only dilemma of the smaller clubs though. They also have to deal with the fact that if they manage to find talented players, the major clubs are highly likely to prise them away with the temptation of trophies and higher pay. There are examples all over the world of clubs that run on this philosophy: Develop players, sell them for high prices, use the profit for further strengthening of the team. Look no further than Borussia Dortmund and Ajax Amsterdam; some of the elites of world football. The sales of Jadon Sancho, Erling Haaland and Jude Bellingham in consecutive seasons gave immense amounts of funds to Dortmund, just like Ajax gained from its sales of Antony and Tyrell Malacia to Manchester United.

But more often than not, it is the high spenders that gain success. United, Manchester City, Liverpool, Real Madrid, Barcelona and Bayern Munich are the traditional powerhouses of European and world football, and none of them shies away from spending the big bucks. Manchester City, a small club until acquired by the Saudi state fund in the late 2000s, is now the de-facto big man of English football. Barcelona and Real Madrid run the show in Spanish football, and Madrid just acquired rising Dortmund and England star Jude Bellingham for $110 million.

Returns on the continental level:

While lots and lots of spending on transfers are usually seen to be profitable in domestic campaigns, continental dominance is not assured. Manchester City and Paris-Saint Germain have been spending huge sums of money for well over a decade now, but it was only in the last season that one of them finally managed to win the UEFA Champions League. In that period, the title was won only by traditional powerhouses such as Real Madrid, Barcelona, Bayern Munich and Liverpool.

Summer Transfer Window spending in millions of pounds across divisions

We see that the most spending is done by the clubs of the English Premier League, which has a huge part in making it the most competitive league in the world. There are 5–6 clubs in England really relevant on the continental level, as opposed to 3–4 in Spain and Italy, and 2–3 from Germany and France.

Naturally, smaller teams can shine as well. We need look no further than Leicester City, who having barely avoided relegation to the Championship in the 204–15 EPL season, miraculously won the Premier League in the 2015–16 season! But this is a classic once in a blue moon story that messes with common sense. In reality however, it is impossible for small clubs to compete properly with the traditional powerhouses and the nouveau riche of club football.

In this article, we have looked at many facets of how game theory is involved in football transfer markets. We have seen how completing a deal very quickly is generally beneficial to the buying club, and why the player and the selling club might wish to draw things out for a while. We have seen what factors are involved in the decision of the player themselves, and the dilemma of a club with a valuable player near the end of their contract. Moving on, we looked at how a club’s history and financial status dictates their transfer policy. Finally, we have concluded by looking at the difficulties minor clubs have in competing with major teams, and how big spending doesn’t necessarily end up in glory on the continental stage.

Leicester City FC players with the 2015–16 Premier League trophy