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The January Transfer Window & Footballer Medicals

15/1/2014

 
By David Butler

Last Sunday evening as part of their coverage of the January Transfer Window, Sky Sports News carried an interesting feature about the importance of players passing a medical before completing a transfer.

Once again it gives us a great opportunity to understand where sport and economics meet. By using economics we can provide some answers why medicals are necessary and, for instance, why an interesting case arose a few years back when reports suggested Carlos Tevez was the first high profile player to have to take a psychological medical (in addition to the usual routine) to complete his move to Manchester City.

Sky's report detailed how the medical is paid for by the buying club and involves half a days’ worth of rigorous cardiovascular, muscle deficiency and blood tests where plenty of ‘lower limb’ (hips and knees) problems are often discovered. After this comes the important question; the doctor asks the player of their medical history. Sky importantly noted here that the player is under no obligation to answer truthfully.

This difference in the knowledge that both parties hold is what economists call asymmetric information. This is a feature of many market transactions and the market for footballers is no different- one party in a transaction (the selling
club or the player) knows a material fact that the other party (the buying club) does not know.

The problem with asymmetric information is that it can lead to forms of opportunistic behaviour, in this case something which is called adverse selection; opportunism characterised by an informed person benefiting from a trade or contract with a less informed person, who is not aware of unobserved characteristics. If buyers are unaware of the quality of a
product they are buying, the sellers may try and sell them a ‘lemon’ at a high price.

In sport it may be a player or selling club has an incentive to lie, withholding information about old injuries to secure a
lucrative deal. The intense medical is thus an attempt by the buying party to overcome any chance of buying a
lemon
by seeking to equalise information through what economists refer to as screening.

 This an action taken by an uninformed party to determine whether the information possessed by the informed person is accurate, such as when you interview for a job or when a bank manager requires information to give you credit.

All in all, the medical gives clubs a means to seek out a lemon in the labour market for footballers and is the closest thing we'll see to footballer doing a job interview!

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