Economic model of financial fair play in professional football

The organisers of most professional sports leagues now employ one or more forms of policy intervention such as revenue sharing and salary capping schemes. The focus of the sports economic literature was initially directed towards the theoretical effects of these policies on competitive balance, wage rates and owner profits in the context of Major US sports leagues. That work has since been broadened in the literature to include other types of policy intervention and other model assumptions such as ‘win maximising’ owners and ‘open’ labour markets that characterise other professional leagues such as for association football. More recent policy intervention has included the regulation of financial performance of professional (association) football clubs. Hitherto, the literature has not addressed the implications of ‘Financial Fair Play’ (FFP) regulation in a dynamic context. This paper provides a basic theoretical model to address that requirement. It shows, for example, the conditions that would result in a stable or an unstable league and the effect of introducing FFP on the total expenditure of teams in the league