The Comparative Economics of North American and European Sports
Edited by Carlos Pestana Barros and Muradali Ibrahímo
6. Bidding for the Olympics: fool’s gold? Robert A. Baade and Victor Matheson INTRODUCTION Governments have spent billions to accommodate the Olympic Games in recent times. While the motivations for hosting the Games are complex, those who seek public funding for them use the promise of substantial economic returns to justify public subsidies. Do the Olympic Games represent an extraordinary economic opportunity for nations and cities worthy of signiﬁcant taxpayer support? The purpose of this chapter is to assess the economic impact of the Olympics and the wisdom of the use of public funds to support them. Particular attention is focused on the Summer Olympic Games in Los Angeles in 1984 and Atlanta in 1996. The evidence gleaned from the experiences of these two cities indicates that the economic impact was more modest than that projected by those promoting the event in those cities. Economic theory casts doubt on a substantial windfall for the host city from the Olympic Games. Cities competing with one another for the Games would theoretically bid until their expected return reached zero. In theory the International Olympic Committee (IOC), the monopolist supplying the Games, would appropriate any economic rents from the Games directly through bribes from the suitors and indirectly through mandating that potential hosts assume all costs incurred relating to the event. Two things could prevent this from happening. First, the monopoly power of the IOC could be countered if there existed only a single suitor for the Games. In fact, Los Angeles...
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