John Goddard

The Economics of Football: The economic theory of professional sports leagues

Introduction As seen in Chapter 1, the idea that market mechanisms can be relied upon to maintain a reasonable degree of competitive equality among the member teams of a sports league, without the need for extensive regulation of player compensation or mobility by the sports governing body, was first articulated by Rottenberg (1956). In discussing the economic structure and characteristics of the North American baseball players labour market, Rottenberg considers the case of two teams located in different towns, one of which has a larger population (or potential market) than the other. Other things being equal the marginal revenue product of a player of a given level of ability is greater with the large-market team than it is with the small-market team. Since the marginal revenue function declines as the quantity of playing talent already held increases, however, it does not pay the large-market team to accumulate the most talented players to the point where complete competitive dominance is achieved. This argument does not depend upon contractual arrangements or the structure of player compensation. It is valid under free agency, in which case the player may be in a strong position to secure most or all of his marginal revenue product in salary negotiations, since his reservation wage is the salary he could command by signing for another team.

The Economics of Football: The football referee

Introduction Football referees are much maligned individuals. They are routinely criticised by managers, players, journalists and spectators for being incompetent, inconsistent and biased. The decisions referees make (often taken in a split-second) can be crucial for a teams prospects of achieving success, while the financial implications of success or failure for individual clubs can be enormous. This helps to explain why the actions of referees today are more intensely scrutinised than ever before. Football authorities are under pressure to take steps to ensure that refereeing decisions are fair, consistent and accurate. The intense criticism of referees in recent times has been reflected in a number of academic papers investigating sources of bias and inconsistency in referee decision-making in various sports and countries. In this chapter, Section 10.1 describes the historical evolution of the football referee, and the referees role in modern-day football. Repeated calls for the use of video or other forms of technology to assist or adjudicate in resolving contested or controversial incidents, and for refereeing duties to be shared between more officials, have so far been resisted by footballs governing bodies. Accordingly, the referee remains the ultimate authority on the field of play, and exercises considerable discretion when officiating games. For example, in the case of foul play the referee has the discretion to decide whether the foul merits a caution, in the form of a yellow or red card. The discretion given to referees may encourage favouritism in their decision-making.

Evaluating probabilities for a football in-play betting market

A recent popular development in sports betting markets is the emergence of in-play betting where gamblers can post bets online during a sporting contest. Betting products available for ‘live’ or in-play betting include the match result, the exact score and the identity of the next scorer. This market has shown spectacular growth for European football. In a novel contribution in this chapter, the authors investigate the efficiency of the in-play football betting market as applied to exact scores in the English Premier League over two seasons. They compare betting exchange implied probabilities with probabilities generated from a statistical model and find some discrepancies after key events, especially just after a goal is scored or a player is dismissed from the field of play.

The Economics of Football: Competitive balance, uncertainty of outcome and home-field advantage

Introduction The theoretical models of the economics of sports leagues reviewed in Chapter 2 are concerned with the degree of competitive balance or competitive inequality between the member teams of a league competition, which in turn determines the extent of uncertainty of outcome for individual match results and for the destination of the league championship. In Chapter 3, the emphasis shifts away from this theoretical analysis at the level of the league championship, towards the measurement and empirical investigation of competitive inequality and uncertainty of outcome for individual match results in football. The measurement of competitive balance or competitive inequality in a sports league has been the subject of a large number of articles in the academic sports economics literature in recent years. Section 3.1 reviews this literature, with particular emphasis on studies focusing on English or European football. Section 3.2 examines the nature of home-field advantage in professional team sports. Section 3.3 investigates the statistical properties of football match results data, and examines the accuracy with which several variants of the Poisson distribution and the negative binomial distribution are able to describe the distributional properties of match results data presented in scores format. Finally, Section 3.4 presents an empirical investigation of persistence in sequences of consecutive match results. Does a winning streak help build a teams confidence, making it more likely that further matches will also be won? Or does it lead to complacency, increasing the likelihood that the next match will be drawn or lost?

The Economics of Football: Game theory and football games

Introduction Game theory is the study, by mathematicians, economists and decision scientists, of decision-making in situations of conflict and interdependence. Most games played in real life are complex, with multiple strategies, incomplete information and pay-offs that might not be explicitly specified. By contrast, sports sometimes give rise to situations in which the structure of a ‘game’ (using the term in the technical sense) is simple and clearly defined. Accordingly, some economists have argued that sports such as football, and others, offer a highly promising arena for the empirical investigation of the propositions of game theory. In football, the ‘game’ between the kicker and the goalkeeper that is played out each time a penalty kick is awarded and taken approximates rather closely to the simple and highly stylised examples typically used to develop the principles of game theory in economics textbooks. The kicker must decide in which direction to shoot and the goalkeeper must decide in which direction to dive. Each decides simultaneously, before knowing the others selection. The reward structure is zero-sum: either the kicker scores; or a goal is prevented because the goalkeeper saves or the kicker shoots high or wide. Section 5.1 of this chapter examines theoretical and empirical research on the strategic choices of kickers and goalkeepers during those few intense and highly charged moments that elapse between the referees decision to award a penalty, and its execution.

The Economics of Football: Forecasting models for football match results

Introduction Chapter 4 describes the estimation and application of goals-based and results-based forecasting models for match outcomes in football, recorded in the form of either goals scored and conceded by the two teams, or in the form of ‘win-draw-lose’ match results. Both types of forecasting model are estimated by fitting regression models to past match results data. A diagonal-inflated bivariate Poisson regression is used for the goals-based model, and an ordered probit regression is used for the results-based model. Both models draw on an extensive set of covariates, reflecting past goal-scoring performance and match results over the preceding 24 calendar months, the significance of the match for end-of-season championship, promotion or relegation outcomes, the current involvement of the teams in the FA Cup or European tournaments, the average attendances attracted by both teams, and the geographical distance between the home stadia of the two teams. Section 4.1 reviews the previous academic literature on modelling the outcomes of football matches. Section 4.2 describes the specification and estimation of a goals-based match results forecasting model. Section 4.3 describes the use of the goals-based model to generate out-of-sample forecasts, in probabilistic form, for either goals or ‘win-draw-lose’ match results. Sections 4.4 and 4.5 describe the estimation and application of a results-based forecasting model. Finally Section 4.6 draws some comparisons between the forecasting performance of the goals-based and results-based models, and between the probabilities generated by these models and a set of implied probabilities derived from the quoted odds (prices) of a selection of high-street and internet bookmakers for fixed-odds betting on match results.

The Economics of Football: List of figures

The second edition of this popular book presents a detailed economic analysis of professional football at club level, with new material included to reflect the development of the economics of professional football over the past ten years. Using a combination of economic reasoning and statistical and econometric analysis, the authors build upon the successes and strengths of the first edition to guide readers through the economic complexities and peculiarities of English club football. It uses a wide range of international comparisons to help emphasize both the broader relevance as well as the unique characteristics of the English experience. Topics covered include some of the most hotly debated issues currently surrounding professional football, including player salaries, the effects of management on team performance, betting on football, racial discrimination and the performance of football referees. This edition also features new chapters on the economics of international football, including the World Cup.

The Economics of Football: Acknowledgements

The second edition of this popular book presents a detailed economic analysis of professional football at club level, with new material included to reflect the development of the economics of professional football over the past ten years. Using a combination of economic reasoning and statistical and econometric analysis, the authors build upon the successes and strengths of the first edition to guide readers through the economic complexities and peculiarities of English club football. It uses a wide range of international comparisons to help emphasize both the broader relevance as well as the unique characteristics of the English experience. Topics covered include some of the most hotly debated issues currently surrounding professional football, including player salaries, the effects of management on team performance, betting on football, racial discrimination and the performance of football referees. This edition also features new chapters on the economics of international football, including the World Cup.

The Economics of Football: Contents

The second edition of this popular book presents a detailed economic analysis of professional football at club level, with new material included to reflect the development of the economics of professional football over the past ten years. Using a combination of economic reasoning and statistical and econometric analysis, the authors build upon the successes and strengths of the first edition to guide readers through the economic complexities and peculiarities of English club football. It uses a wide range of international comparisons to help emphasize both the broader relevance as well as the unique characteristics of the English experience. Topics covered include some of the most hotly debated issues currently surrounding professional football, including player salaries, the effects of management on team performance, betting on football, racial discrimination and the performance of football referees. This edition also features new chapters on the economics of international football, including the World Cup.