nep-spo New Economics Papers
on Sports and Economics
Issue of 2021‒12‒20
two papers chosen by
Humberto Barreto
DePauw University

  1. Estimating the Economic Impact of Major League Baseball’s All-Star Game Using High Frequency Tourism Data By Robert Baumann; Victor Matheson; E. Frank Stephenson; Robert Murray
  2. Underestimating randomness: Outcome bias in betting exchange markets By Oliver Merz; Raphael Flepp; Egon Franck

  1. By: Robert Baumann (College of the Holy Cross); Victor Matheson (College of the Holy Cross); E. Frank Stephenson (Berry College); Robert Murray (College of the Holy Cross)
    Abstract: Despite claims, primarily from Republican lawmakers, that the removal of the 2021 Major League Baseball All-Star Game has cost local businesses in the Atlanta area $100 million in damages, an examination of hotel occupancy during the 2014 All-Star Game in Minneapolis and the 2019 All-Star Game in Cleveland suggests that these events generated at most 10,000 additional room nights and $4.5 million in additional hotel revenues for the host cities. These figures suggest that the All-Star Game generates a total direct marginal increase in tourism spending of only $3.9 to $9.4 million. Claiming that Georgia has lost $100 million from the removal of the game is pure fiction with no basis in economic data.
    Keywords: sports, stadiums, baseball, All-Star Game, mega-events
    JEL: L83 Z20
    Date: 2021–07
  2. By: Oliver Merz (Department of Business Administration, University of Zurich); Raphael Flepp (Department of Business Administration, University of Zurich); Egon Franck (Department of Business Administration, University of Zurich)
    Abstract: This paper examines whether the outcome bias harms price efficiency in betting exchange markets. In soccer, the match outcome is an unreliable performance measure, as it underestimates the high level of randomness involved in the sport. If bettors overestimate the importance of past match outcomes and underestimate the influence of good or bad luck, we expect less accurate prices for lucky and unlucky teams. Analyzing over 8,900 soccer matches, we find evidence that the prices are overstated for previously lucky teams and understated for previously unlucky teams. Consistent with the outcome bias, the betting community overestimates the importance of past match outcomes. Consequently, this bias translates into significantly negative betting returns on lucky teams and positive betting returns on unlucky teams. Based on this finding, we propose a simple betting strategy that generates positive returns in an out-of-sample backtest.
    Keywords: Behavioral biases, Market efficiency, Forecasting, Betting industry, Soccer
    JEL: D40 G40 L83
    Date: 2021–08

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