Table of Contents

International Handbook on the Economics of Mega Sporting Events

International Handbook on the Economics of Mega Sporting Events

Elgar original reference

Edited by Wolfgang Maennig and Andrew Zimbalist

From the Olympics to the World Cup, mega sporting events are a source of enjoyment for tens of thousands of people, but can also be a source of intense debate and controversy. This insightful Handbook addresses a number of central questions, including: How are host cities selected and under what economic conditions? How are these events organized, and how is local resistance overcome? Based on historical and empirical experience, what are the pitfalls for the organizers of these events? What are the potential economic benefits, including any international image effects? How can the costs be minimized and the benefits maximized for host cities and countries? How do these mega events impact the challenges of globalization and what is their environmental legacy?

Chapter 4: The Winner’s Curse: Why is the Cost of Mega Sporting Events so Often Underestimated?

Wladimir Andreff

Subjects: economics and finance, public sector economics, sports


Wladimir Andreff 1 INTRODUCTION Grenoble taxpayers were not very happy to pay local taxes until 1992 in order to cover the financial deficit from the 1968 Winter Games! The 1976 Summer Olympics in Montreal outperformed the Grenoble Winter Olympics in terms of deficit: the latter was so large that Montreal taxpayers were repaying the debt until 2006, a period of 30 years. After Montreal’s financial mess, the number of candidate cities wishing to host such mega sporting events dropped, and since the 1984 Games in Los Angeles the watchword of local Olympics organizing committees (LOOCs) and the International Olympic Committee (IOC) became ‘the Games will pay for the Games’. This was incentive enough to trigger an increase in the number of candidates to host the Olympics but not enough to cure the financial deficit disease. After having claimed for seven years that the Games would pay for the Games, the 1992 Winter Olympics in Albertville resulted in a $60 million deficit.1 Were those three exceptions proving the rule that mega sporting events are usually organized at a reasonable and correctly anticipated cost? Unfortunately not. In the same vein, when the 2012 Summer Games was awarded to London in July 2005, the expected and advertised cost was about £2.4 billion. By the end of 2008, the cost estimates ranged from £9.4 billion to £12 billion. Some press articles have suggested that the promoters of the London candidature had deliberately underestimated the Olympics bill in order to be awarded the Games. In...

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