Labor Market Equilibrium Under Multilateral Bargaining the Case of the Football Transfer Market

This paper studies how multilateral bargaining affects the labor market outcomes. Specifically, it focuses on the football transfer market where three sides – a player, a buying club and a selling club – interact. I construct a theoretical model to derive the optimal transfer payment and the wage offer as the outcome of a multilateral sequential bargaining. I find that bargaining power of clubs negatively influence on player’s wage. For the empirical tests, I collect data on top five European leagues in the season of 2016/17. The indicators include player- and club-specific controls. To overcome the selection bias problem, which occurs due to non-random transfers, I run a two-stage estimation and confirm that not only players’ performance but also buying and selling clubs’ characteristics of affect the transfer payment and, hence, the wage offer. In particular, clubs’ attendance and goal difference appeared significant for transfer payment.