nep-spo New Economics Papers
on Sports and Economics
Issue of 2008‒08‒21
fourteen papers chosen by
Joao Carlos Correia Leitao
Technical University of Lisbon

  1. Arenas vs. Multifunctional Stadia – Which Do Spectators Prefer? By Arne Feddersen; Wolfgang Maennig
  2. The Feel-good Effect at Mega Sports Events. Recommendations for Public and Private Administration Informed by the Experience of the FIFA World Cup 2006 By Wolfgang Maennig; Marcel Porsche
  3. From Competitive Balance to Match Attractiveness in Rugby Union By Johan Fourie; Krige Siebrits
  4. The Effect of Mixed Leagues on Aggregated Investments and Competitive Balance By Helmut Dietl; Markus Lang; Stephan Werner
  5. Corruption in international sports and how it may be combatted By Wolfgang Maennig
  6. Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events? By Dennis Coates; Brad R. Humphreys
  7. Assessing the Economic Impact of Sports Facilities on Residential Property Values: A Spatial Hedonic Approach By Xia Feng; Brad R. Humphreys
  8. The Effect of Luxury Taxes on Social Welfare in Team Sports Leagues By Helmut Dietl; Markus Lang; Stephan Werner
  9. Bourse et Football By Michel Aglietta; Wladimir Andreff; Bastien Drut
  10. Award-Winning Architecture and Urban Revitalization: The Case of “Olympic Arenas” in Berlin-Prenzlauer Berg By Gabriel Ahlfeldt; Wolfgang Maennig
  11. Sport Practice Tourism - A Segment of Sport Tourism Market By G. Carvalho, Pedro; Lourenço, Rui
  12. Les Determinants Economiques de la Performance Olympique By Madeleine Andreff; Wladimir Andreff; Sandrine Poupaux
  13. Wer ist der beste Formel 1 Fahrer? Eine ökonometrische Talentbewertung By David Stadelmann; Reiner Eichenberger
  14. "Company Strategies and Sport Models" By Christer Ericsson

  1. By: Arne Feddersen (University of Hamburg); Wolfgang Maennig (University of Hamburg)
    Abstract: Large sports stadia construction follows two different general concepts: (1) Mono-functional arenas which are specially suited for one sport exclusively and which are characterised by the absence of an athletic track. (2) Multifunctional sports stadia which can be used for different sporting or cultural events. Officials of clubs often argue that the atmosphere in an arena is significantly better than that of a multipurpose facility and that spectators prefer such an atmosphere. Estimated panel regressions with fixed effects show a significant positive effect of a mono-functional soccer stadium on spectator demand. Controlling for other demand determinants in the German professional soccer league, Bundesliga, an isolated effect of around 4,800 additional spectators a game can be found. This translates into a substantial increase of about 18.7% against the mean value of 25,602 spectators per Bundesliga game.
    Keywords: Demand for sport, soccer, mono-functional arenas, multifunctional stadia
    JEL: C23 C24 L83
    Date: 2008–08
  2. By: Wolfgang Maennig (University of Hamburg); Marcel Porsche (University of Hamburg)
    Abstract: One of the most important social effects of the 2006 football World Cup was the feel-good effect. The present contribution is one of the first to deal with the development of a general theory for the management of feel-good effects and systematically analyses the influencing factors taking the 2006 World Cup as an example. Of importance are suitable basic organizational and infrastructure conditions in the realms of security, transport, and ecology. The media activities of public and private sponsors should break away from the traditional narrow focus and classic brand sponsoring in favor of a more socially responsible sponsoring. Sporting success of the home team is important, which may be due in equal measures to the style of play of the team and its demeanor. The creation of generally accessible participation opportunities through free TV in the host country and the setting up of fan festivals can counteract any frustration that might arise from the allocation of ad-mission tickets. Any targeted manipulation of the weather may be considered with due regard to possible ecological implications.
    Keywords: Feel-good Effect, Sports Economics, World Cup, Mega-Events; Image Effects, Public Viewing
    JEL: H83 L83 M14
    Date: 2008–08
  3. By: Johan Fourie (University of Stellenbosch); Krige Siebrits (University of Stellenbosch)
    Abstract: Professional sports leagues aim to provide attractive contests that maximise fan interest. Literature on the demand for professional sport suggests that fans derive utility from identifying with teams and from the quality of contests, which depends on uncertainty of outcome and demonstration of the skills required to excel at the game. Measures of the attractiveness of sports contests should incorporate these two dimensions of quality. This paper proposes measures of the attractiveness of rugby union matches corresponding to Newton’s gravity equation. These measures proxy the extent of uncertainty of outcome by the points margin between the participating teams and demonstration of playing skills by the total number of points scored in a match, respectively. Using hypothetical match scores, the paper shows that the most accurate of the proposed measures uniquely identify degrees of “attractiveness”. A comparison of major rugby leagues for the period 2006 to 2008 suggests that the Guinness Premiership provided the most attractive matches, followed by the Magners League and the Super 14.
    Keywords: Economics of sport leagues, Rugby union, Competitive balance, Uncertainty of outcomes, Match attractiveness
    JEL: L83
    Date: 2008
  4. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Stephan Werner (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: A wide range of literature which discusses the impact of the chosen objective function on competitive balance and revenue sharing. Some authors argued that sports clubs (or the owners of the sports clubs) behave like profit maximizers. This assumption of profit maximization coincides with the standard microeconomic theory of firms. On the other hand, some researchers pronounced that European football clubs behave like utility maximizers having a utility function that incorporates variables other than (only) club profits. Also, this assumption is well-known in standard microeconomic theory, since households maximize their utility with respect to a given budget constrain. In this paper, we want give a formal framework for the so called mixed leagues, i.e. professional sports leagues, where some club owners maximize clubs’ profits and the rest of the clubs are interested in maximizing their winning probability. This paper fills the gap in the existing literature since mixed leagues have not (formally) discussed, and therefore, no policy implications exist.
    Keywords: Mixed League, objective function, competitive balance, aggregated investments
    JEL: M21 D02
    Date: 2008
  5. By: Wolfgang Maennig (University of Hamburg)
    Abstract: This contribution attempts a delimitation of the concept of corruption in sport and gives an overview of topical instances. It is thereby demonstrated why the definition of corruption in sport is especially problematic. The causes of the corruption and their social costs are analysed. The anti-corruption measures of the Amateur International Boxing Association (AIBA) and the German Football Association (DFB) are described. These are based on two fundamentally different approaches and can be regarded as representative of many anti-corruption measures in sport
    Keywords: Corruption, sports
    JEL: K42 L83
    Date: 2008–08
  6. By: Dennis Coates (Department of Economics, University of Maryland, Baltimore County); Brad R. Humphreys (Department of Economics, University of Alberta)
    Abstract: This paper reviews the empirical literature assessing the effects of subsidies for professional sports franchises and facilities. The evidence reveals a great deal of consistency among economists doing research in this area. That evidence is that sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates. The paper also relates survey evidence showing that economists in general oppose sports subsidies. In addition to reviewing the empirical literature, we describe the economic intuition that probably underlies the strong consensus among economists against sports subsidies.
    Keywords: sports, subsidies, stadiums, arenas
    JEL: L83 H2 H4
    Date: 2008–08
  7. By: Xia Feng (University of Illinois at Urbana-Champaign); Brad R. Humphreys (University of Alberta)
    Abstract: This paper estimates the intangible benefits of a two sports facilities in Columbus, Ohio on residential property values. We estimate a spatial hedonic model that avoids biased and inconsistent estimates in the presence of uncorrected spatial autocorrelation. The results suggest that the presence of sports facilities in Columbus have a significant positive distance-decaying effect on surrounding house values, supporting the idea that professional sports facilities generate important intangible benefits in the local economy. OLS overestimates the hedonic model parameters compared with Maximum Likelihood and Spatial Two Stage-Least-Squares.
    Keywords: Economic Impact, Residential Property Values, Sports Facilities, Hedonic Model, Spatial Dependence, Spatial Hedonic Model
    JEL: I18 L83
    Date: 2008–08
  8. By: Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Stephan Werner (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: In this paper we model the effect of a luxury tax in the framework of profit maximizing clubs. A well-known effect of luxury taxes is a more balanced league, but no social welfare evaluation has taken place in existing literature. The effects of a more equal league are not surprising since large clubs reduce their investments. We discuss the simple case of a taxation-redistribution scenario: Large clubs finance the subsidy for the small clubs through a luxury tax. Under this assumption, the social welfare tax rate will not fully balance the league. In the second step, we assume that the league organization gets a share (exogenous) of the tax revenues and can determine the ’optimal’ tax rate. From their point of view a 100% tax rate is optimal. This tax rate can result in the social welfare optimum. We also show that there exists a second and third best where the welfare optimizing tax rate is below the league revenue maximizing tax rate. On the other hand we show, a fully balancing tax rate is, in general, not welfare maximizing.
    Keywords: Luxury Taxes, social welfare, redistribution, taxation regimes
    JEL: M21 D02
    Date: 2008
  9. By: Michel Aglietta (Université de Paris 10 Nanterre, EconomiX); Wladimir Andreff (University Paris 1 Panthéon Sorbonne); Bastien Drut (Ecole Nationale de la Statistique et de l’Administration Economique)
    Abstract: An empirical study of the Dow Jones Stoxx Football index exhibits a high volatility of the returns and share prices regarding a sample of floated clubs as well as an insufficient market depth (low and irregular traded volumes). The theoretical analysis of the relationship between market illiquidity and share price volatitlity does not rely on an insufficient funding by speculators who adopt “contrarian” behaviour but on the uncertainty attached to the fundamental value of football clubs. The outcome is multiple equilibria in the market for assets. From witnessing how brokers and specialised audits value three representative football clubs, it appears that it is extremely difficult to fix the actual fundamental value of a football business. The sporting performances of a club have a strong incidence on its share price all over the season (tested with English football clubs). Such result opens an avenue for further research about the fundamental value of a football club. Instead of considering – as in the Anglo-American view – that the stock market will discipline the governance and management of European football clubs, we show that it would be worth hardening the clubs’ budget constraint before their exposure to financial market evaluation. The financial crisis of European football is less harsh in France though it translates into big clubs accounting imbalances, a high volatitlity of their return on equity, and their lasting indebtedness. It is so despite the existing financial supervisory body which monitors French football (the so-called DNCG), contrarily to the situation in other European football leagues. A “weak” clubs’ governance is revealed by their reluctant account disclosure (eventually achieved) and their inability to curb wage inflation and handle player transfers. We test that the club budget constraint is softened by the television godsend which is a significant determinant of player wages. Spreading the “French model” of governance throughout European football still requires some progress, which is also a prerequisite for successful float of football club shares at the stock exchange. Ten recommendations are derived to improve football regulation.
    JEL: G12 G30 G34 Z19 L83
    Date: 2008–08
  10. By: Gabriel Ahlfeldt (University of Hamburg); Wolfgang Maennig (University of Hamburg)
    Abstract: This paper investigates socioeconomic impacts of three multifunctional sports arenas situated in Berlin-Prenzlauer Berg, Germany. The three arenas are chosen with respect to their potential to contribute to a process of revitalization of their economically deprived neighbourhood. Impact is assessed by conducting hedonic analyses of standard land values under consideration of spatial spill-over effects. To confirm results and to provide a more comprehensive interpretation we employ a differences-in-differences approach to check for structural breaks in development of rents and selected socioeconomic variables within determined areas of potential impact. Our results suggest that arenas emanate positive externalities and apparently have accelerated the process of gentrification going on in Prenzlauer Berg. However, evidence also supports neighbourhood activists´ concerns that congestion problems may adversely affect property values, at least when not addressed appropriately during the period of planning.
    Keywords: Stadium Impact, Stadium Architecture, Gentrification, Hedonic Regression, Spatial Autocorrelation
    JEL: R31 R53 R58 L83
    Date: 2008–08
  11. By: G. Carvalho, Pedro; Lourenço, Rui
    Abstract: Sport Tourism represents the knowledge and the group of practices where Sport and Tourism became interdependent. This overlapping area turns clearly at two levels that might be named by Sport Tourism Spectacle and Sport Tourism Practice. According to Pigeassou [9] the foundations of sport tourism do not consist purely of classifying sport tourism activities using categories employed in sport activities. In this article we provide a theoretical framework for the understanding of the market segment in Sport Tourism Practice, looking at their client behaviour typology (enthusiastic and casual), their motivations and high lightening the role this framework plays on the tourist destiny development. Furthermore we present some empirical results of a seminal experimental design.
    Keywords: Sport; Sport Tourism; Sport Tourism Practice; Sport Tourism Spectacle
    JEL: A12 L83
    Date: 2008–08–06
  12. By: Madeleine Andreff (University Marne-la-Vallée); Wladimir Andreff (University Paris 1 Panthéon Sorbonne); Sandrine Poupaux (Deutsche Sporthochschule, Cologne)
    Abstract: The analysis of economic determinants of Olympic performance was for a long time a macroeconomics of the cold war in which the number of medals won by a nation was explained by its endowment with economic and human resources, then its political regime and a host country effect. We adopt a post-cold war view of the Games which provides an additional explanation closer to the Olympic ideals since it takes into account individual athlete performances, culture, and sporting disciplines. Various econometric estimations that translate this renewed view are achieved under the constraint of limited available data, over 1976-2004. In a first specification inspired from the macroeconomic approach by Bernard and Busse (2004), with a more detailed country classification, GDP per capita, population, the political regime and the host country effect determine the number of medals won. A second specification adds a variable that captures cultural differences across various regions in the world, which improves the previous estimation. A third estimation relies on a new individual data base, introduces an economic classification of sports as a dependent variables and enables estimating, for an athlete from a given country, his/her chances of participating to an Olympic final and of winning a medal. Finally, regarding the prediction of the would-be medal wins in Peking 2008, an inertial variable is introduced in the macroeconomic model in order to capture an ‘Olympic worship’ in those nations which are used to win a number of medals, a variable that differentiates them from other participating nations. Another prevision is based on individual data without any inertia.
    JEL: L83 Z19 C13 C24
    Date: 2008–08
  13. By: David Stadelmann; Reiner Eichenberger
    Abstract: Who is the best formula 1 driver? Until today it was impossible to answer this question because the observable performance of a driver depends both on his talent and the quality of his cars. In this paper we for the first time separate driver talent from car quality by econometrically analyzing data for 57 years of Formula 1 racing. Our estimates also control for the number of drivers finishing, technical breakdowns and many other variables that influence race results. While Michael Schumacher is often believed to be the best driver, he is overtaken by Juan Manuel Fangio and Jim Clark.
    Date: 2008–08
  14. By: Christer Ericsson (Department of Social Sciences, Malardalens University)
    Abstract: The comparison in this article between companies in Japan and Sweden showes that although there are obvious historical and cultures differences between companies in the two countrys; differences in the industrialization and in modernization; differences in how sport were introduced and how it was shaped; there are similarities in how companies used sport in company strategies.
    Date: 2008–07

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