UEFA financial fair play: the curse of regulation

Abstract

This paper applies simple game theory in order to analyze the UEFA Financial Fair Play (FFP) policy, which was fully implemented in the 2013/14 season. By involving budget constraints put on clubs, FFP may lead to unintended or even adverse effects as indicated by some of the obtained results. In particular, the analysis shows that due to being in the situation of a Prisoner’s Dilemma, the clubs have a strong incentive to bypass the new regulations, what results in additional costs both for clubs to hide and UEFA to detect deviant behavior. As these costs might deter small clubs from trying to cheat, this consequently must have negative consequences on the level of competitive balance within a league. However, a positive outcome of FFP might be that clubs become more independent from benefactors or sugar daddies.

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