nep-spo New Economics Papers
on Sports and Economics
Issue of 2012‒10‒20
three papers chosen by
Joao Carlos Correia Leitao
University of Beira Interior and Technical University of Lisbon

  1. Analysing Determinants of Match Attendance in the European Rugby Cup By Vincent Hogan; Patrick Massey; Shane Massey
  2. Welfare Economics of "Financial Fair Play" in a Sports League With Benefactor Owners By Paul Madden
  3. Insolvency in English professional football: Irrational Exuberance or Negative Shocks? By Stefan Szymanski

  1. By: Vincent Hogan (University College Dublin); Patrick Massey (Compecon Ltd); Shane Massey (Trinity College Dublin)
    Abstract: The economic literature on professional sports leagues suggests supporters’ utility depends on uncertainty of outcome (competitive balance) and the quality of play. Unlike soccer, where the Champions League is dominated by teams from larger countries, our analysis indicates that the ERC exhibits high degrees of both dynamic and inter-league competitive balance. Using data from 1,096 matches played over 17 seasons, we analyse match attendances in the pool stages of the European Rugby Cup (ERC), a competition that involves teams from the three main European rugby leagues. The results indicate that the quality of the home team is the main determinant of match attendances, although a strong visiting team also raises attendances. Medium-term (seasonal) uncertainty, which has received less attention in the literature, appears far more important than short-run (match) uncertainty. Measures designed to make matches more attractive, e.g. bonus points for high scoring, appear to have had little effect on attendances.
    Keywords: Professional team sports, competitive balance, consumer demand
    JEL: D12 D21 L22 L23 L83
    Date: 2012–10–12
  2. By: Paul Madden
    Date: 2012
  3. By: Stefan Szymanski (University of Michigan)
    Abstract: Insolvency is an endemic problem in the world of European football. This paper uses a unique database of financial accounts for English football clubs between 1974 and 2010 to examine the causes of insolvency. Two alternative hypotheses are considered- “irrational exuberance”, meaning that owners attempt to achieve a significant improvement in league position which is not affordable, leading to financial crisis. This view seems widely espoused and seems to lie behind initiatives such as UEFA’s Financial Fair Play. An alternative is that club finances are subject to negative shocks – either to productivity or to demand- and that a series of such shocks can lead to insolvency. The empirical model provides evidence in support of this alternative hypothesis.
    Keywords: Insolvency; football
    JEL: L83 G33 G38
    Date: 2012–10

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