Welfare Economics of “Financial Fair Play†in a Sports League With Benefactor Owners

With European soccer leagues in mind, a novel model of club owner objectives nests standard profit (and win) maximization, but adds benefactor behavior where owners inject personal funds to increase their team’s quality. A “generosity†parameter differentiates owners; parameter value zero equates to profit maximizers, with benefactors emerging at sufficiently positive values. The model is used to investigate consequences of Union of European Football Associations’ (UEFA) “Financial Fair Play†regulations (FFP)  for the league, aimed to preclude benefactor injections. Assuming (post-Bosman) a relatively large elasticity of talent supply to the league, FFP is a poor regulatory device, creating welfare losses for fans, owners, and players.