Real option and strategic Game Theory decisionscan they be used by clubs to improve their investment in football players?

Resumen

The aim of this work is to compare and explain the differences between the crowd valuations and final negotiated prices for some of the most famous transfers over the last twelve years (2007-2018). The article analyses different values for forwards taken from the sports website Transfermarkt, developing a statistical model based on personal, performance, risk, environmental and popularity variables. From those values, the article finds an explanation for the final prices paid for the players based on a combination of real option valuations, incorporating the players’ life cycles, and game theory.We find that in a large percentage (70 %) of the analysed cases, the price paid was higher than the intrinsic market value resulting from the statistical model, implying the existence of monopolistic rents, possibly paid as “growth options” on prices from different negotiating conditions. On occasions, the final prices also exceed the value ofthe growth option, calculated under neutral bargaining conditions, highlighting the lack of economic viability of important transfers. These results can lead to financial difficulties or even bankruptcy for the clubs involved and generates an inflationary process in the football transfer markets.The algorithm provides more flexibility and realism than previous proposals, based on the life cycle of football players, introducing the uncertainty and volatility of projections through Monte Carlo simulation, the capacity of clubs to bargain a price at any point of the contract and finally, the buyer’s ability to sell the player if hissubsequent performance is not as expected