International Handbook on the Economics of Mega Sporting Events
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International Handbook on the Economics of Mega Sporting Events

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?
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Chapter 31: Future Challenges: Maximizing the Benefits and Minimizing the Costs

Wolfgang Maennig and Andrew Zimbalist


Wolfgang Maennig and Andrew Zimbalist 1 INTRODUCTION It is characteristic for the scholarly analyses of mega sporting events to make the assumption that the governing bodies wield monopoly power. In the case of mega events, the sporting federations use their monopoly power in order to try to extract the maximum of benefits, profits, or, in economic terms: ‘rents’. The International Olympic Committee (IOC), for instance, auctions off the right to host the Winter and Summer Games in a multi-stage competition. Prospective host cities/countries bid against each other to purchase a unitary product. The competitive bidding, in turn, leads the would-be hosts to bid up to the point where the expected marginal social utility of benefit from the Games equals the expected marginal social cost; or worse, if the winner, due to imperfect information, is subjected to a curse and bids beyond the benefit (see Andreff, ch. 4 in this volume). Or worse still, the bidding cities may suffer from a principal–agent problem. That is, a city’s (principal) campaign to host a mega event may be initiated and driven by private interests (agent) that have individually to gain from the construction, design, fanfare, financing, and so on of the event. The private interests of these individuals or companies may only be congruent with the broader development interests of the city by coincidence. If the private interests form a coalition and, from their base of economic power and political connections, then enlist local politicians, the resulting campaign may have little to...

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