International and Australian Experiences
New Horizons in the Economics of Sport series
Labour markets for sports players have several distinctive features. For most players the alternative to playing professionally is far less attractive. This effectively gives their sport monopsony power, as the sole buyer of the player’s services. There are a few crossovers from one sport to another especially if the required skills are similar (for example, between rugby union and rugby league), but most professional players become too specialized to have this as a practical option. The clubs also face a dilemma in that players’ abilities vary but identifying precisely the contributions of individual players is difficult. At the top end of the skill distribution are superstars who can be match winners such as Michael Jordan in basketball, Wayne Gretzky in ice hockey or Diego Maradona in soccer. Their value on the pitch and even off it in terms of merchandise sales may be large and almost incalculable, enticing teams into bidding wars to obtain their services. This possibility encourages leagues to devise rules that forestall such bidding wars, typically by giving a player’s existing club first refusal for the player’s next contract and allowing the club to demand a transfer fee if the player wishes to move. The restrictions on mobility are often to a degree that would not be tolerated by workers in other parts of the economy.
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