Reporting on speculation that David De Gea could sign a new deal at Manchester United, the Telegraph’s Mark Ogden noted “any move to extend De Gea’s contract would be a surprise.” Given De Gea’s failed transfer to Real Madrid this summer, this weekend’s announcement that the Spaniard has signed on for a further four years at Old Trafford, with an optional fifth, should come as no surprise at all. After all, De Gea – and perhaps more importantly his agent, Jorge Mendes – had no option but to seek a new contract at Old Trafford – if they are rational.
Game theory has been under attack for the assumption of rationality, but in negotiations that involve a significant sum of money, however, rationality can safely be assumed. After all, people tend to be very thorough when there is a significant sum of money on the table. Here, we apply basic game theory to show that De Gea had to sign a new contract at United.
United’s position was simple. It was absolutely critical for the club to tie De Gea to a new deal lest he leave on a free transfer come next summer. On the other hand, the goalkeeper was faced two options: negotiate a new new deal or leave on a free transfer, with the presumption that he would be able to negotiate a higher wage than he would have been able to otherwise.
Critical to De Gea’s thinking is the lack of guarantee that Real Madrid would sign the stopper next summer. It may appear likely, given the player’s desire to move and Madrid’s summer-long chase, but after Los Merengues‘ behaviour in recent weeks, it was never a foregone conclusion. Keylor Navas or Kiki Casilla might have a terrific season, while the Madrid club has typically focused on recruiting the best player from each international tournament as a marquee signing. It is not inconceivable that Real will focus entirely on the stars of Euro 2016 next summer, although acquiring a goalkeeper of De Gea’s quality for free might be hard to resist
De Gea’s options were limited to two given that few clubs in Europe can match the package on offer at United or Madrid. In essence, De Gea would be putting all his eggs in the Real’s basket if he did not extend his contract at United. So this contact “game” is entirely between De Gea and Real Madrid, with the ‘keeper proceeding with Madrid’s possible action in firmly mind.
By signing the reported £200,000-per-week deal, De Gea is set to earn roughly £6 million more per annum over his current £80,000-per-week contact. This new deal has reportedly been backdated to the start of negotiations in 2014 – a sum that runs into the millions. By refusing to sign, De Gea would have lost out on a huge amount of money.
No matter what Real Madrid’s action, the rational De Gea prefers to sign a new contact. This is because Madrid might still make a big-money move for the Spaniard – after all, the Spanish side has already displayed willingness to invest a significant sum in a player with only one year left on his contact.
To put this another way, Madrid has everything to gain by signing De Gea on a free, but since there is a realistic chance of Madrid buying De Gea for a fee anyway, the player has a financial incentive to sign a new contact. Indeed, it is no surprise that De Gea was amenable towards a new deal for this very reason. Moreover, in many jurisdictions, Mendes could be sued for professional negligence if he did not negotiate that new contract with United given the risks to De Gea’s career
United’s executive vice chairman Ed Woodward had a critical role in this game. Given De Gea’s rational need for a new contract, the executive could have, conceivably, driven down the proposed wage since, post 2 September, the Spaniard benefits by any offer that is greater his current deal.
Still, awarding De Gea a huge contract has its benefits too since the deal places De Gea beyond the reach of most, if not all, clubs in Europe. No matter how much De Gea wants to go to Madrid, his tenure at Old Trafford is now secure if the Spaniards fail to make an offer.
Arguably De Gea deserves that huge new deal having been the Reds’ standout player for past two seasons. The fact that he is a goalkeeper should not preclude him earning the kind of wage on offer to star outfield players. In addition, a high wage serves as a useful deterrent against future Madrid medling. United could have exploited that fact by offering De Gea a higher wage still; creating a permanent barrier any future move.