the social optimum would be between 0.32 and 0.44. For such a rate in the market,
however, the big league would not demand any talent from the small league at all as is
shown in the right-hand panels of Table 6. For both leagues 1 and 2 the closed-economy
case will result, which is advantageous to the small league compared to the case with no
training facilities. For league 2 the social welfare optimum would imply higher welfare,
however.
4.2.3 A home-grown players rule
As mentioned in the introduction an alternative way to regulate the mobility of players is
by introducing a ‘nationality’ rule or a ‘home-grown’ rule. The former rule has been
deemed conflicting with European laws as it imposes an impediment to the free
movement of persons. The latter rule, however, as it is now applied in European Football
is not based on nationality and thus will probably not be interpreted as an infringement on
European law. The purpose of this subsection is to consider the effectiveness of this rule
in reaching the social-welfare solution and to compare it to a system of transfer fees,
considered previously.
In our model, the home-grown rule will only be effective for league 1 as league 2 has no
other option but to employ home-grown talents, or no talents at all. Indicate the total
number of talented players in league 1 by T1 = T1 + T21, where as before T1 is the
number of home-grown talents and T21 is the number of talents transferred from the
small league. A home-grown rule prescribes that T1 should at least be a proportion, say
λ, of the total number of talents playing in league 1. League 1 can decide to train more
talents than prescribed. This is indicated by the parameter μ, so that the total number of
home-grown talents playing in the big league equals T = (λ + μ)T1, where μ ≥ 0. It
follows that the relationship between home-grown and imported talents can be written as
T1 = εT21, where ε = (λ + μ)^1 - λ - μ) With these definitions, and assuming no
transfer fee system, profits for league 1 can be written as:
Π1 =N1σα(1+ε)T21(1-α(1+ε)T21))-c(e1-1) (17)
21
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