How do you put a price on goal-scoring football talent?

Before the World Cup, Müller's asking price was put at £9 million, and now it has shot up to £25 million. Given that Real Madrid President Florentino Perez is said to be "obsessed" with signing Müller, the price may rise yet further.

Uruguay striker Suarez was valued at £18 million before the World Cup and, according to newspaper speculation, his three goals have added £12 million to this, with Chelsea a possible destination.

While the transfer window has been open since the end of the domestic season, it is the end of the World Cup that has started off the bidding wars. But how much does a good performance in the World cup tell us about the quality of a player?

The English leagues only relaxed their prohibition on foreign players in 1978 and the first two World Cup transfers were Ossie Ardiles and Ricky Villa from the winning Argentinian team — both of these turned out to be pretty suc-cessful signings.

There were no World Cup spending sprees in England after the 1982 and 1986 competitions, and after 1990 there was an exodus of players from the England team of semi-finalists. The 1994 competition signalled the growing financial power of the Premier League with the arrival of Jürgen Klinsmann, Ilie Dumitrescu and Gica Popescu at Tottenham. In 1998 the pre-Abramovich Chelsea led the way with the acquisition of World Cup stars Marcel Desailly and Albert Ferrer (ok, he only played once in that World Cup, but at least he was there).

In 2002, the World Cup produced a mixed bag of signings, with Rio Ferdinand moving from Leeds to Manchester United, Arsenal acquiring Gilberto Silva and his winner's medal, and Liverpool splashing out less successfully on El-Hadji Diouf, a tournament sensation but less than sensational Premier League player.

In 2006, it was Chelsea again that made the headlines in the transfer market, but this time the acquisitions of Andriy Shevchenko and Michael Ballack took place just before the World Cup started. There were few headline signings in England after the event.

Overall, the picture is mixed — some good buys and some awful ones — which is generally the case with transfers. While there is a very high correlation between what a team pays its players and the success of the team in the league, there is a much weaker correlation between transfer spending and success.

Part of this has to do with timing — a transfer fee is an investment over a period of years, rather than payment for performance in a specific year. Another explanation is that for a club transfer, spending is a net figure —money paid less money received, and in general the net figure is quite small (in reality, far less cash changes hands than the newspaper headlines might lead you to believe). The net transfer spend is a balance of gambles with a good deal of randomness thrown in.

This time, Manchester City appears to have done the smart thing and lined up its purchases before the World Cup, even if the announcements have been made in the last couple of weeks. The club avoided negotiations after the event and is reported to have paid less than the pre-tournament estimates, which is quite an achievement.

Pity poor Wigan: it thought it had lined up Paraguayan defender Antolin Alcaraz, only for him to claim now that his World Cup performance has opened new horizons. It looks as if they will have to pay more than they thought they had agreed if they want to get him.

And herein lies the true problem. The paradox of the winner's curse says that if there exists a distribution of valuations among buyers, then logically the buyer with the highest valuation will win in an auction; but if the true valuation is close to the mean, then the winning bidder is overpaying.

If Wigan thought he was worth £2.7 million before the World Cup, should it revise its valuation on the basis of only four games? Logic says not much. But having got this far, should the club back down now? Rationality says that, however much you have already spent in trying to get him at the right price, this does not justify agreeing now to pay the wrong price. But there is evidence that not only football clubs are prone to the "sunk cost fallacy".

Even more interesting are cases like Ghana's Asamoah Gyan and Paraguayan Nelson Valdez, whose values appear to have increased threefold or fourfold in as many games.

These are just speculative numbers, but will anyone be rash enough to be drawn into paying these sums? As the transfer deadline approaches, the fear of regret — missing out on that key player who makes all the difference — might become overwhelming. Not that everyone's value has risen. The value of both Cesc Fabregas and Fernando Torres has fallen according to some of the press, because neither of them had a great World Cup (despite being on the winning team).

Transfer markets are fascinating because they expose questions about the rationality of decision-making. The same issues arise in stock markets, and the bottom line is the relationship between market value and fundamental value. The problem is fundamental value is something that can only be estimated after the event.

Many people are prepared to assume that market values in football are irrational, citing poor decisions as proof and dismissing good ones as mere luck. Separating the good from the bad is not so simple in reality because subsequent events such as injuries play such a large role.

Like Napoleon's generals, football managers need to be lucky.

Stefan Szymanski is Professor of Economics at Cass Business School