Football is one of the most prominent sports in Europe, with its significance extending into both social and economic domains. The football market provides a wealth of information unavailable in many other markets, offering unique insights for analysis. Additionally, it features distinctive economic mechanisms, such as the football transfer market, which makes it a one-of-a-kind labor market. These characteristics make football a fascinating field with endless opportunities for study, offering valuable perspectives that can be applied to other areas.
In 2024, nearly €11 billion was spent on football player transfers—payments made when players move from one club to another. This high spending raises concerns about fairness because wealthier clubs can more easily afford top talent, potentially distorting competition. Moreover, some clubs are shifting their focus: instead of concentrating solely on winning matches, they are also investing in developing and selling players as part of their business strategy. Our paper introduces a model of the football transfer market that explains how clubs set their transfer strategies based on prize incentives and budget constraints. By combining market modeling with empirical analysis of simulated transfer data, we develop a framework that connects club incentives with observed spending patterns in professional football transfers. Our model incorporates a non-linear optimization process where clubs' player transfer valuations are influenced by both competitive and financial objectives. Our findings on simulated data show that this process leads to an increased competitive gap between the best and worst clubs in the league. By using market simulations, we test various policy measures, including Financial Fair Play regulations, to see how these rules might influence club behavior on the transfer market. These policies seek to reduce club inequality and enhance league competitiveness. Our findings show that tightened transfer budgets help reduce inequality when the gap between teams is low, but enhance inequality when the gap is already substantial. This study makes three main contributions. First, we build a model that accounts for strategic interactions of clubs in the transfer of players in the football market. Second, we propose a new method to evaluate transfer market outcomes, in order to test market constraints and help identify the best policies to reduce inequality among clubs in the same competition. Third, we demonstrate how financial fair play policies impact transfer markets through simulated data, providing meaningful results for real-world applications. Our research contributes to the growing field of sports economics by providing a tractable model that captures the strategic interactions and preference dynamics inherent in player market transactions, while offering practical insights for policy-makers and club executives in professional football.