Valuation of Football Players - A Complete Pricing Framework

Publish in

Documents

7 views

Please download to get full document.

View again

of 114
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Share
Description
NORGES HANDELSHØYSKOLE Bergen, Spring 2011 Valuation of Football Players A Complete Pricing Framework By: Anders Munkhaugen Gulbrandsen Christian Munkhaugen Gulbrandsen Supervisor: Jøril Mæland Specialization: Economic Analysis NORGES HANDELSHØYSKOLE This thesis was written as a part of the Master of Science in Economics and Business Administration program - Major in Economic Analysis. Neither the institution, nor the advisor is responsible for the theories and methods used, or the results an
Tags
Transcript
   Valuation of Football Players A Complete Pricing Framework  By: Anders Munkhaugen GulbrandsenChristian Munkhaugen GulbrandsenSupervisor: Jøril Mæland Specialization: Economic Analysis NORGES   HANDELSHØYSKOLE This thesis was written as a part of the Master of Science in Economics and BusinessAdministration program - Major in Economic Analysis. Neither the institution, nor theadvisor is responsible for the theories and methods used, or the results and conclusionsdrawn, through the approval of this thesis. NORGES HANDELSHØYSKOLEBergen, Spring 2011  Abstract  In this thesis we will describe a football player’s value to a football club. First we will explorehow a player can generate revenue. In doing so, we will describe two valuation factors, wherea football player can fulfil none, one or both of them. The two factors will describe how afootball player can generate revenue for his club. Next we will present a valuation modelbased on theory from option pricing. The valuation model will be linked up to the two factors,and give us the financial value of a football player. A player’s financial value can differamong clubs. So, in the case of a potential transfer the clubs involved must negotiate atransfer fee, while the buying clubs must negotiate a salary with the player. We will present abargaining framework to discuss which parties have bargaining power. With this framework we can also discuss outcomes of transfer fee and salary. I     Foreword  This thesis is written as the final part of the Master of Science in Economics and BusinessAdministration program at Norges Handelshøyskole.When we were given the opportunity to work on a topic of our own choice for a full semester,we thought choosing a topic we were interested in would be motivating. It certainly was.Football is the biggest sport in the world, and especially transfer fees and wages are sources of controversy so we wanted to find out more about these variables; and our analytical major inEconomic Analysis gave us the foundations necessary to create a model where financialtheory and game theory are central elements. So, could we create a model that not only wouldexplain past transfer fees and wages, but also help determine transfer fees and wages in futuretransfers?When you create a model like this there are always some factors and uncertainties you willnot be able to account for, and there will always be questionable assumptions (e.g. completeinformation). But we feel that we have combined theory and practice in a way that certainlyexplains a big part of the transfer fee and player wage.We would like to thank our advisor, Jøril Mæland, for being accessible and helpful during theprocess.Bergen, 07.06.2011Anders Munkhaugen Gulbrandsen, Christian Munkhaugen Gulbrandsen II     Contents   1. Introduction ............................................................................................................................ 1   1.1 Research topics ................................................................................................................. 2   2. Motivating example ................................................................................................................ 2   2.1 The simple case ................................................................................................................ 2   2.1.1 Central results ............................................................................................................ 7   2.1.2 First attempt at bargaining ......................................................................................... 7   2.2 The more realistic case ..................................................................................................... 9   3. The economics of football and the labour market ................................................................ 11   3.1 Models for football club behaviour ................................................................................ 12   3.1.1 Rationality and profit maximisation ........................................................................ 12   3.1.2 Win at any cost vs. sustainability ............................................................................ 13   3.1.3. The football club as a revenue maximiser .............................................................. 14   3.2 The labour market .......................................................................................................... 17   3.2.1 The Bosman ruling .................................................................................................. 17   3.2.2 General regulations from FIFA ............................................................................... 18   3.2.3 The transfer from A to Z ......................................................................................... 19   3.2.4 Loan, option to buy, performance clause in transfer fee, third-party owners ......... 20   4. Research topic 1: What value can a football player add to a football club? ........................ 23   4.1 Possible valuation factors – identifying Increased Revenue (IR) and Decreased Revenue(DR) in the NPV condition ................................................................................................... 23   4.1.1 Matchday revenue ................................................................................................... 24   4.1.2 Broadcast revenue ................................................................................................... 28   4.1.3 Commercial revenue................................................................................................ 30   4.1.4 Conclusion ............................................................................................................... 32   4.2 The valuation model ....................................................................................................... 33   4.2.1 The case of asymmetric information in football ..................................................... 34   III   
Related Search
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks