Economics plays a pivotal role in the world of soccer, and it is particularly significant in the European transfer market. The English Premier League has two yearly transfer windows. One lasts from June to August, with the other window only being open in January. During these periods, English soccer clubs can attempt to buy players from other teams, and it is here where we see various elements of economics manifest themselves. For instance, when a team lowers its asking price for one of its players, the demand from other teams for that particular player generally increases. On the other hand, increasing the price of a player usually lessens the amount of demand for him. One notable caveat to this is the fact that many teams try to increase the price of a player when another team is trying to purchase him. This leads to a series of negotiations as both teams strive to reach a compromise.
When deciding whether or not to spend their transfer budget on a player, soccer clubs must take into account the related opportunity cost. In general, they will choose to pursue the player if they believe that he can impact them positively enough to earn back the money that they spent on him. For example, the English soccer club Liverpool spent a large sum of money on centre-back Virgil van Dijk. Although this transfer was questioned at the time for its hefty price, it ultimately proved fruitful as he helped improve the club’s defense and guided them to their first Premier League title. In this case, signing van Dijk managed to “earn back” the budget that Liverpool spent on him through the prize money that he eventually helped them win. Thus, if a club decides that signing a player will be fruitful in the long run, they will attempt to purchase him because they believe the opportunity cost is low.
Manchester United’s signing of Cristiano Ronaldo this past summer acts as a major example of economics appearing in soccer. Internationally renowned as one of the best athletes of all time, Ronaldo made headlines when he rejoined Manchester United on August 31, 2021 (Dawson, 2021, pa. 1). However, the reception to this transfer was not universally positive. Indeed, many people doubted the wisdom of United’s decision. Ronaldo is 36-years-old, meaning that he will presumably retire within the next couple years (Dawson, 2021, pa. 12). Meanwhile, United spent £20 million on him, and they are currently paying him £20 million a year for his wages (Wilson, 2021, pa. 6). Several naysayers have questioned the club’s decision to spend so much money on a player who is nearing the end of his career, believing the opportunity cost to be too high to risk. However, United clearly believe that the benefits outweigh the costs, hoping that he will provide enough strength on the team’s attacking front to lead them to lucrative success. In addition, the increase in Manchester United's shirt sales that will presumably result from the transfer may also have impacted the United board’s decision.
References
Dawson, R. (2021). Cristiano Ronaldo completes stunning Manchester United return. ESPN. https://www.espn.com/soccer/soccer-transfers/story/4465497/cristiano-ronaldo-signs-for-manchester-united-stunning-old-trafford-return-confirmed.
Wilson, J. (2021). Cristiano Ronaldo held Juventus back: Just what do Manchester United see in him? The Guardian. https://www.theguardian.com/football/blog/2021/aug/28/cristiano-ronaldo-held-juventus-back-just-what-is-that-manchester-united-see-in-him.
Its so interesting to see this side of economics in the soccer world! Cristiano Ronaldo's trade was certainly a gamble for Manchester United. However Ronaldo, being not only one of the best soccer players in the world but arguably one of the biggest celebrities in the world, is a big enough name to not only to benefit the skill of the team but to bring over fans and therefore sales. Though it is a hefty price to pay for a single man joining a team, the opportunity costs will most certainly be in favor for Manchester United.