nep-spo New Economics Papers
on Sports and Economics
Issue of 2014‒03‒22
four papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior and Universidade de Lisboa

  1. Loss Aversion, Team Relocations, and Major League Expansion By Humphreys, Brad; Zhou, Li
  2. Surveying the Literature and the People: The Economic Impact of Sports Teams and Civic Pride By Pete Groothuis; Kurt W. Rotthoff
  3. Home Team Advantage in the NBA: The Effect of Fan Attendance on Performance By La, Vincent
  4. Soccer Sponsor: Fan Or Businessman? By Iuliia Naidenova; Petr Parshakov; Alexey Chmykhov

  1. By: Humphreys, Brad (University of Alberta, Department of Economics); Zhou, Li (University of Alberta, Department of Economics)
    Abstract: Professional sports teams receive large public subsidies for new facility construction. Empirical research suggests that these subsidies cannot be justified by tangible or intangible economic benefits. We develop a model of bargaining between local governments and teams over subsidies that includes league expansion decisions. The model features loss aversion by fans that captures lost utility when a team leaves a city. The model predicts that teams exploit this loss aversion to extract larger than expected subsidies from local governments, providing an explanation for these large subsidies and highlighting the importance of anti-trust exemptions in enhancing teams' bargaining positions.
    Keywords: Endowment Effect; Loss aversion; major league sports; bargaining
    JEL: D42 H25 L12 L83
    Date: 2014–03–02
  2. By: Pete Groothuis; Kurt W. Rotthoff
    Abstract: Public funds to build sports stadiums are commonly justified by the perceived economic impacts and civic pride they create for the community. Since the 1980s, there have been many studies looking at the economic impact and civic pride created by professional sports teams. Most of the literature supports the idea that economic impacts are not created, but there are mixed results on the magnitude of civic pride. Overall, most of the economic literature suggests that the benefits created by sports teams or events do not outweigh the cost of public subsidies provided. We further the research by reviewing the economic impact and civic pride literature and matching it to survey results on the Super Bowl and Winter Olympics to see if economic research has informed public opinion. We find that the survey results match the findings in the literature suggesting that economics profession has indeed informed public opinion. Key Words: Economic Impact, Civic Pride, Sport Stadiums
    Date: 2014
  3. By: La, Vincent
    Abstract: Our study aims to estimate the effect of fan attendance on performance in the National Basketball Association (NBA). We use game day and adverse weather as instruments for attendance. Using two-stage least squares, we fail to find a statistically significant effect of attendance on overall game outcomes. However, again using two stage least squares, we do find a statistically significant effect on away team's free throw percentage. We find that an increase in percent attendance by 10 percentage points is, on average, associated with a decrease in away team's free throw percentage by 1 percentage point.
    Keywords: NBA, Basketball, Instrumental Variables, Effect of Fans on Performance, Home Court Advantage
    JEL: C36 D01 L83
    Date: 2014–03–14
  4. By: Iuliia Naidenova; Petr Parshakov; Alexey Chmykhov
    Abstract: This paper investigates how soccer sponsorship influences the financial performance of sponsors. We use an instrumental variable regression framework combined with a fixed effects model to avoid the possible endogeneity raised by omitted variables and reverse causality. The number of tweets containing both team and sponsor names were collected to use as the instrumental variable. Top European leagues were analyzed. Our results show that soccer sponsorship is more charity than commercial investment. Shareholders should be aware of sponsorship deals, and senior management should analyze the financial assumptions of cash flow forecasting for such projects carefully.
    Keywords: soccer, sponsorship, instrumental variable, twitter
    JEL: L83 O16
    Date: 2014

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