European club football: why enormous revenues are not enough?

Abstract

This essay discusses why many European football clubs have experienced financial problems, despite earning high revenues. The fact that European football clubs are win maximizers make them more aggressive when competing for talented players than professional teams on other continents. So-called eyes of a needle, such as promotion, (avoiding) relegation and qualifying for international tournaments strengthen the cost push effects. Due to the free movement of labour, any regulations have to be implemented simultaneously across the whole of Europe. Achieving such unilateral agreement in 52 national leagues is difficult. European football has a history of powerful clubs that are not favourable to regulations that can reduce their advantages. A game-theory approach illustrates the mechanisms that lead European clubs to spend more resources than they can afford. Additionally, this part offers a new and hopefully interesting explanation, besides objective function differences, when it comes to understanding micro differences between US and European sports.