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Transferring Cristiano Ronaldo,[object Object],An analysis of the largest transfer in the history of world football,[object Object]
What is a Transfer?,[object Object],A club owns the right to have a contract with a certain player,[object Object],Other clubs may “buy” that right from them,[object Object],When agreement is made, the selling club transfers the right to the buying club,[object Object],The buying club still needs to sign the player to a separate contract of their own,[object Object]
World Record Transfers,[object Object],First transfer was Alf Common in 1905 for £1,000,[object Object],Broke £1 million in 1979,[object Object],Current record is £80 million for Cristiano Ronaldo’s move from Manchester United to Real Madrid,[object Object]
Methodology	,[object Object],Background,[object Object],Cristiano Ronaldo,[object Object],Real Madrid,[object Object],Theoretical Models,[object Object],Monopoly Rents,[object Object],Superstar Effects,[object Object],Game Theory,[object Object]
Who is Cristiano Ronaldo,[object Object],There are some things Ronaldo can do with a football that make me touch my head and wonder how on earth he did it.” – Luis Figo (Ex- Real Madrid Star and former world player of the year),[object Object]
Who is Cristiano Ronaldo,[object Object],Started playing for a club in his hometown in Madeira at the age of 8,[object Object],Quickly signed by Sporting Lisbon and on his 1st team debut at age 17 he scored 2 goals,[object Object],Signed by Manchester United just days after playing in a friendly match,[object Object],Set a record by scoring 42 goals in 48 appearances for Manchester United in 2007,[object Object]
Real Madrid,[object Object],Most popular club in the world,[object Object],History of spending extreme amounts on transfers,[object Object],Galacticos Era 2000-2005,[object Object],Bought three former world players of the year,[object Object],Mostly seen as a failure,[object Object],New Galacticos – Ronaldo, Kaka, Benzema (Spent £220m in 2009),[object Object]
Theoretical Model for Transfers,[object Object],Objective of a club : ,[object Object],maxU = U(Q,π),[object Object],Team Performance can be seen as: ,[object Object],Q=Q(q,Ѳ),[object Object],Profit: ,[object Object],π = R-C ,[object Object],Revenue: ,[object Object],R = ρG(ρ,Q) + F(Q) + N,[object Object],Cost:,[object Object],C = W(q) + O,[object Object],Seller: Ts = Wqs – ωs,[object Object],Buyer: Tb = Wqb – ωb,[object Object]
Superstar Effect,[object Object],Additional revenue generated from increased prices, and the increase in fans,[object Object],MC is minimal since television can reach millions without any additional costs,[object Object],Real Madrid is able to maximize its return on investment from a purchase like Cristiano Ronaldo because it already has the infrastructure to exploit all revenue streams and maximize their profit,[object Object],Two measures are highly correlated to high wages, goals per game and assists, generate high levels of fan interest,[object Object],Lucifora and Simmons identified 0.40 goals per game to be exceptional and a good indicator of a superstar.  Cristiano Ronaldo, since 2006, has a goal rate of .615,[object Object]
Game Theory,[object Object],Real Madrid has a dominant strategy, to buy,[object Object],This is driven by the performance, marketing, revenue, and increase in fan opinion.  No matter what Manchester United chooses, Real Madrid will choose to buy because it gives them higher payouts in each case,[object Object],Manchester United is faced with a dilemma,[object Object],Low payout if they chose to sell and Real Madrid chose not to buy.,[object Object],This would destabilize the team and lower the morale of Cristiano to the point that his performance may suffer and fan opinion will decrease,[object Object],Payoff is higher not to sell if Real Madrid chooses not to buy ,[object Object],due to the performance boost of having Cristiano in the team, revenue stays up, fans opinion remains the same,[object Object],Given that Real Madrid’s dominant strategy is to buy, their payoff is higher selling,[object Object],Leads to a Nash Equilibrium of Manchester United selling and Real Madrid buying,[object Object]
Conclusion,[object Object],Real Madrid,[object Object],Given the performance and marketing advantages of signing Cristiano Ronaldo, it is well worth the money to Real Madrid,[object Object],Manchester United,[object Object],Cristiano had been vocal previously about wanting to move to Real Madrid,[object Object],Playing level declined in 2008 when he was working on a move,[object Object],The fans had become neutral to him leaving and some actually celebrated when he was sold,[object Object],Sir Alex Ferguson, the manager, had brought in replacements, obvious he had to be sold,[object Object],Good decision for both,[object Object]
Sources,[object Object],Testing for monopoly rents in the market for playing talent by Bill Gerrard and Steve Dobson. Journal of Economic Studies, 2000; 27 (3), 142-164.,[object Object],Superstar Effects in Sport: Evidence From Italian Soccer by Claudio Lucifora and Rob Simmons.  Journal of Sports Economics 2003; 4; 35,[object Object],‘Who’s on first’: an empirical test of the Coase Theorem in baseball by Donald Cymrot, James Dunleavy and William Even. Applied Economics, 2001; 33, 593-603.,[object Object],http://soccernet.espn.go.com/news/story?id=654318&cc=5901,[object Object],http://news.bbc.co.uk/sport2/hi/football/8085391.stm,[object Object],http://cristianoronaldos.com/honorific-quotes-about-cristiano-ronaldo-what-do-other-famous-people-say-about-ronaldo/,[object Object],http://www.cristianoronaldoworld.com/Biography.php,[object Object],http://uk.eurosport.yahoo.com/football/cristianoronaldo.html,[object Object],http://en.wikipedia.org/wiki/Cristiano_Ronaldo,[object Object],http://www.insideworldsoccer.com/2009/07/cristiano-ronaldo-sir-alex-ferguson.html,[object Object],http://www.madridgalacticos.com/the-galacticos-era/,[object Object],http://en.wikipedia.org/wiki/FIFA_World_Player_of_the_Year#List_of_male_winners,[object Object],http://www.guardian.co.uk/football/2009/aug/05/xabi-alonso-unveiled-real-madrid,[object Object],http://www.europeancuphistory.com/clubs/real.html,[object Object], http://www.matchanalysis.com/,[object Object],http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1739&language=english,[object Object],http://bleacherreport.com/articles/203506-beyond-the-numbers-a-fun-look-at-ronaldos-madrid-contract,[object Object],http://online.wsj.com/article/SB124470998673005495.html,[object Object],http://en.wikipedia.org/wiki/History_of_Real_Madrid_C.F.,[object Object],http://www.realmadrid.com/cs/Satellite/en/Home.htm,[object Object],Inner Circle Sports LLC – Investment Bank that helped to formulate ideas for how to approach the topic,[object Object]

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