Reflective Exercise: Selling footballers: the economic viewpoint
Hope City is a Premier League football club playing in Europe next season. It has had enquiries from a well-known Spanish club for its star player and a figure of £34 million has been mentioned. This player came to the club through its own youth programme and is now captain of the team. He currently has a number of years to run on his contract. The club has to be managed as a business. It needs to decide what to do. Assume for simplicity that the wage bill remains the same whatever the club does.
A. What is the cost to the club of keeping the player?
Which of the following are true? More than one may be. a The value of the next best alternative player in the squad. b The cost the club incurred in developing the player through its youth programme. c The highest offer the club can get for him on the transfer market. (It should explore whether £34 million is the highest offer it can get.) d The opportunity cost is the goals and any merchandise sales the club generates by the player. e What the player would be worth in his next best alternative occupation.
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B. How would you work out whether or not to keep the player?
Which of the following are true? More than one may be. a If the club has major cash flow problems and urgently needs more funds it should sell the player, but if it doesn’t it shouldn’t sell him. b Assess the costs and benefits to the club of selling the player. c Explore the likely ways in which the club could spend the highest offer and assess whether the cost of keeping the player more than outweighs the benefits he brings to the club (such as his contribution to the team’s success, merchandising sales, etc.).
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Copyright: Embedding Threshold Concepts Project 14/08/07
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.

Reflective Exercise: Selling footballers: the economic viewpoint 2
There is a complication in what we have been considering, known as the Bosman ruling. If a player gets to the end of their contract, the club will get no transfer fee from a move and the player can agree a contract with any club he wants.
Hope City is a Premier League football club playing in Europe next season. It has had enquiries from a well-known Spanish club for its star player and a figure of
£34 million has been mentioned. This player came to the club through its own youth programme and is now captain of the team. The club has to decide whether to keep the player.
Consider how the club should come to a decision to keep the player if:
(a) He currently still has a number of years to run on his contract.
(b) He has less than six months to run on his contract.
Remember to use the economic concepts considered in section 1 in your answer.
Your answer…
You can continue your answer on another sheet if needed…
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Copyright: Embedding Threshold Concepts Project 14/08/07
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.

Reflective Exercise: Selling footballers: the economic viewpoint 3
Now review your answers in the light of the economists’ approach below. Were your answers the same? If not, how did they differ?
A. What is the cost to the club in keeping the player?
The cost to the club has to be assessed in opportunity cost terms because it is using scarce resources (the player in this case). With opportunity cost we value the resource in terms of what we have to give up in using it. We consider the next best alternative use of the player, which for Hope City is to sell him to another club and use the money for other purposes, including buying other players.
Hence (c) is the correct answer. (a) and (e) are incorrect as they are not examining the best alternative use of this player to the club. (d) is incorrect as it is not examining the alternative, but the current use. (b) is incorrect as it is considering costs in the past – what matters for an economic decision is the value of the resource now.
B. How would you work out how to make the decision?
Since we are using scarce resources, the decision to keep the player involves both gains (the benefits) and losses (the costs). It is only worth deciding to do something if the benefits are greater than the costs. Decision taking is usually concerned with marginal changes – a change of one unit – and here we are considering what to do about one player, not the whole squad.
The decision should assess the costs and benefits of keeping the player and if the benefits are greater than the costs then the club needs to keep the player. The relevant cost is the opportunity cost discussed above (and will involve an assessment of the value to the club of new players that can be bought with this income). The benefits are in terms of the value of the player in the squad, including aspects such as merchandise sales. (In practice there are also many risks that need to be assessed.)
Hence (b) and (c) are correct. (a) is incorrect because although a major cash flow problem may increase the opportunity cost of keeping the player and thus makes it more likely that these outweigh the benefits of keeping him, this is not the only circumstance in which the club should decide to sell.
Copyright: Embedding Threshold Concepts Project 14/08/07
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.

Reflective Exercise: Selling footballers: the economic viewpoint 4
What are the important elements of analysis that economics brings to this question?
We need to consider opportunity costs and marginal costs and benefits for the reasons we considered in the feedback to section 1A and B.
How are these elements applied to these actual two cases?
Case (a) we largely covered in section 1 A and B. Here we just bring the points together:
Opportunity cost – The cost to the club of keeping the player is the highest amount he can be sold for. Here the club should also go on to explicitly consider what it could do with the income, in terms of buying other players and assessing their effect on the team’s performance etc.
Marginal costs and benefits – The opportunity cost is the marginal cost of keeping the player. The marginal benefit is the effect of that player in particular on the team’s performance (and related factors such as revenue). If the additional benefit is greater than the additional cost then the player should be kept.
In case (b) we need to identify what elements have changed and how.
Opportunity costs (which are also the marginal costs) – This is still what the player can be sold for (which, however, may be less in this situation).
Marginal benefits – With only six months to go on the contract the problem for the club is that the player may leave in six months with no transfer fee. The current opportunity cost is therefore compared to the small marginal benefit in retaining the player for the next six months (at a time when he may be concentrating on matters other than simply playing). However, there is a complication as there is another option that may give greater benefits and needs to be considered. The club can negotiate a new contract with the player and this option needs to be evaluated.
In practice we have to acknowledge there are many uncertainties in these calculations!
In your explanation do you: Yes Partly No
1. Correctly identify the opportunity costs and realise that it is the same in both cases?
2. Explain that to make a decision, marginal benefits as well as marginal costs have to be considered?
Do you understand what important insights are added to the approach of economics to this decision?
Copyright: Embedding Threshold Concepts Project 14/08/07
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.

Reflective Exercise: Selling footballers: the economic viewpoint 5
Objectives of the exercise and prerequisites
This exercise presents a scenario students have heard/read about in the media and we have found it does generate lively discussion.
Learning Focus: developing an understanding of opportunity cost and its role in decision making.
Threshold Concepts pivotal to this learning are opportunity cost and marginality.
Prior Knowledge Required
1.
Little prior knowledge of economics is required for this exercise. It can be used after a very brief introduction to the concept of opportunity cost. It does not necessarily require any knowledge of marginality – the idea of marginal cost and benefit is introduced in the exercise.
2.
We have provided a small amount of essential background to the scenario. You may feel that you want to add a little more depending on the background of your students, but we have generally found this is not necessary. Students need to learn to apply the economic concepts and additional detail can confuse rather than help them.
Sequencing and timing
1.
The feedback to section 1 should be given to students before they attempt section 2. In a tutorial situation this can be done verbally.
2.
Although section 2 gets students (partly) to replicate the arguments covered in section 1 we have found it important to get them to do so.
We have found some students who were answering the short questions in section 1 correctly were still making errors when asked to write about the scenario themselves in section 2.
3.
The exercise is a relatively short reflective exercise, but it is unlikely to be completed in much less than 30 minutes if fully completed in class time.
4.
It is important that students do approach the exercise as a learning experience and that they may make mistakes, but need to reflect on the feedback and improve.
Copyright: Embedding Threshold Concepts Project 14/08/07
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.