Transfer Economics: Is Berbatov Really Worth Thirty Million Pounds?

In a previous article, I put forward the argument that a player is worth whatever the buying club is willing to pay for him. Little did I expect that it would become a hot topic of debate among Premiership managers.

Following Sir Alex Ferguson's comments that “The big surprise [of the summer] was Liverpool paying £20 million for Keane,” Rafael Benitez has himself suggested that the 30.75 million pounds that Manchester United paid for Dimitar Berbatov was too much.

In the wake of the Bulgarian's lukewarm debut for Manchester United, a few fans may now agree with Benitez.

By suggesting that Manchester United paid too much for Dimitar Berbatov, Benitez is actually implying that they could have bought a player:

a) of the same quality at a lower price.

b) of slightly better quality at the same price.

c) of significantly better quality at a slightly higher price.

d) of slightly lower quality at a significantly lower price.

The only other option is not to buy a striker at all. For Manchester United, not buying a striker could cost them a lot in terms of conversion of new fans, selling tickets, merchandise, and winning trophies.

In deciding the maximum amount they would spend on a new striker, all those factors are taken into consideration and calculations made.

The problem with exercising the options above (a, b, c or d) is that there is imperfect information in the market for players.

There is no reliable yardstick (not even goals ratio) of measuring a striker's quality. Therefore, the decision to pursue one player and not the other is usually a matter of preference.

Equally, there is no reliable method for pricing a player. Therefore the selling club will always seek to sell at a price close to what the buying club is willing to pay.

A manager's preference of one player over the other is influenced by a variety of factors and due to the uniqueness of each club and each player, there will always be differences in preference.

In the end, as long as the player is able to show a good return on the club's investment, the transfer fee is justified. Benitez himself defends the decision to sign Robbie Keane by saying:

"If Keane scores goals and does really well for us then the price doesn't matter."

The same could be said of Berbatov, but the question is, "What if he is a flop?"

In football, nothing is certain. Whether the player was cheap or expensive, the possibility is always there that the player will not have the same impact as was expected of him.

It is better to buy a cheap flop than an expensive one, but a club could also lose out on a potential star by being frugal with their transfer kitty—think Wayne Rooney, Rio Ferdinand, and Cristiano Ronaldo, who was also expensive for a player that was virtually unknown.