​Liverpool FC, Dele Alli and Diseconomies of… | tutor2u Economics
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​Liverpool FC, Dele Alli and Diseconomies of Scale

A recent news story on how Liverpool missed out on the signing of Tottenham’s Dele Alli offers a good example of diseconomies of scale in a large football club such as Liverpool.

Read Liverpool vs Tottenham: Catalogue of errors saw Spurs sign Dele Alli to pass Reds in Premier League hierarchy

We can see that Liverpool were favourites to sign Alli - his manager at MK Dons was a Liverpudlian, and Alli’s favourite player was Steven Gerrard - he wouldn’t take much persuading.

However, we can see that in the process there were a number of diseconomies of scale arising from Liverpool’s handling of the signing:

Poor Communication

When Alli travelled to the Liverpool training ground, no one thought it would be a good idea to wake up Steven Gerrard from his pre-match nap. This meant Alli didn't get to meet his hero - an obvious opportunity to curry favour had gone.

Rising costs of complexity

The set-up at Liverpool meant that in order to sign players there had to be agreement between the manager, transfer committee and chief executive. As firms get bigger and specialise, extra layers are added on - this has clearly proved a problem here.

Risk averse

As Alli was young, the American owners only saw him as an Under 21 prospect instead of the player he is today. Because of this they offered him £4000 per week and refused to meet the MK Dons asking price.

You could also argue that the American ownership of Liverpool did not fully understand the game of football, thus causing further problems in addition to the time it takes to get any agreement when owners have fingers in many sporting pies and they are based Stateside.

History now tells us that Spurs signed Dele Alli, and he has played a central role in Tottenham’s excellent season. Liverpool, on the other hand, are struggling for a Europa League place.

That’s economics!

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