Don't let Deadline Deals become Sunk Costs

With the end of the European transfer window fast approaching, there are many clubs around the continent that will end up making panic purchases that they are sure to regret. For every major league in the world it’s easy to find a plethora of articles of the worst deadline day deals of all time, from strikers that seemed incapable of scoring goals, to goalkeepers who appeared porous as a sea sponge, to midfielders who forgot how to pass the ball overnight. So if you are a club that has realized that it’s made a big money mistake in the transfer window, what should you do?

This week, we’ll be discussing the bias called the sunk cost fallacy. While it’s one of the best known biases, people still fall victim to it constantly.

To illustrate this fallacy, imagine that you have bought tickets to go and see a new movie that just released. Halfway through, you realize you’re not enjoying the film at all and would rather do something else instead. Do you leave? Most people, according to a study by Strough et al. (2008), would stay to watch the rest of the movie. Why? Because you’ve paid for it, of course! You should try and get your money’s worth!

Now imagine instead that these tickets had been given to you for free. You found them on the ground outside the theatre and after trying to return them to the front desk (like the good Samaritan you are) they decide to let you use it to go and watch anyway. Now, if you don’t enjoy it, do you stay for the whole time? If I had to predict your answer, I would say it’s less likely that you do.

If we take a step back, we can begin to see how illogical this behaviour is. After you’ve bought a ticket to the film, that money is gone. It’s a sunk cost. If you asked the theatre for a refund they wouldn’t give it to you just for not enjoying the film. You have lost that money. So now, with that money gone, you should be purely trying to maximize your utility (or happiness, whichever you prefer to use) from that point onwards. So if you’re in the theatre and feel you’d be happier elsewhere, surely you should go and be happier elsewhere. Subjecting yourself to a bad movie isn’t going to bring your money back!

But people don’t process information in this way. We subconsciously think that we need to wear a hair shirt simply because we bought it. This is the sunk cost fallacy.

In the realm of football, clubs are making the mistake of the person at the movie theatre each and every day. The difference for them is that the initial cost is much higher, and so the consequences of giving up seem far more dire.

The example of the sunk cost fallacy in football that always springs to mind for me is the case of Kepa Arrizabalaga. Kepa was signed by Chelsea as a seemingly unknown player to be the successor to a position that had entertained truly elite individuals, in Thibaut Courtois and Petr Cech, for over 15 years. He was to be Chelsea’s number one, the talismanic leader at the back whose safe hands were to be integral to the London club’s success. Fittingly for this description, Chelsea made him the most expensive goalkeeper of all time in 2018, pipping the £70 million that Liverpool paid for Alisson in that same summer by purchasing the Spaniard for £71 million.

Kepa Arrizabalaga after signing for Chelsea in 2018

The five years that followed were a major disappointment. Likely to be best remembered for refusing to be substituted in the 2019 League Cup final, Kepa’s Chelsea career to this point has been defined by short periods of seemingly strong goalkeeper play followed by months of mediocrity. Over the course of his career, Kepa Arrizabalaga has conceded more 4.1 more goals than his PSxG (post shot expected goals, the best measure of the quality of shots a goalkeeper faces) would suggest. While this doesn’t seem like many goals, what that means is that Kepa has conceded 4.1 more goals than the average, not the goalkeepers worth £70 million. For comparison, Alisson in that time has conceded 25.5 goals fewer than the average goalkeeper would concede. Not only that, Alisson has a higher pass completion percentage at short, medium, and long distances, has performed basically the same as Kepa at preventing crosses, and has swept up behind his back line far more frequently (stats here).

So if Kepa was performing worse than the average goalkeeper for much of his time at Chelsea, why wasn’t he replaced? The simple explanation is that the average goalkeeper didn’t cost £70 million. Chelsea continued to operate based on the sunk cost of Kepa’s record breaking transfer instead of on his performances. In fact, in the one period that Kepa was dropped in favour of Edouard Mendy, Mendy went on to be the FIFA Best Men’s Goalkeeper in 2021.

While I am picking on Kepa Arrizabalaga in this article, he’s not the only time a large club has seen their performances suffer as a result of the sunk cost fallacy. Harry Maguire was simply not a fit at Manchester United. At the same club, it appears already that Antony may overstay his welcome. Barcelona have almost made a habit of it in recent years, which is a contributing factor to their current financial woes. In a year or two’s time from now, there will be a whole host of new players who made their move this summer that fans would consider to be sunk costs.

In the world of football, the margins between victory and defeat, failure and success are becoming razor thin. There is very little space for sentiment or bias. The clubs that eliminate the sunk cost fallacy and look at their squad objectively will always have the edge.

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Strough, J., Mehta, C. M., McFall, J. P., & Schuller, K. L. (2008). Are older adults less subject to the sunk-cost fallacy than younger adults? Psychological Science, 19(7), 650-652. https://doi.org/10.1111/j.1467-9280.2008.02138.x