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Regression to the Tail: Why the Olympics Blow Up

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  • Bent Flyvbjerg
  • Alexander Budzier
  • Daniel Lunn

Abstract

The Olympic Games are the largest, highest-profile, and most expensive megaevent hosted by cities and nations. Average sports-related costs of hosting are $12.0 billion. Non-sports-related costs are typically several times that. Every Olympics since 1960 has run over budget, at an average of 172 percent in real terms, the highest overrun on record for any type of megaproject. The paper tests theoretical statistical distributions against empirical data for the costs of the Games, in order to explain the cost risks faced by host cities and nations. It is documented, for the first time, that cost and cost overrun for the Games follow a power-law distribution. Olympic costs are subject to infinite mean and variance, with dire consequences for predictability and planning. We name this phenomenon "regression to the tail": it is only a matter of time until a new extreme event occurs, with an overrun larger than the largest so far, and thus more disruptive and less plannable. The generative mechanism for the Olympic power law is identified as strong convexity prompted by six causal drivers: irreversibility, fixed deadlines, the Blank Check Syndrome, tight coupling, long planning horizons, and an Eternal Beginner Syndrome. The power law explains why the Games are so difficult to plan and manage successfully, and why cities and nations should think twice before bidding to host. Based on the power law, two heuristics are identified for better decision making on hosting. Finally, the paper develops measures for good practice in planning and managing the Games, including how to mitigate the extreme risks of the Olympic power law.

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  • Bent Flyvbjerg & Alexander Budzier & Daniel Lunn, 2020. "Regression to the Tail: Why the Olympics Blow Up," Papers 2009.14682, arXiv.org.
  • Handle: RePEc:arx:papers:2009.14682
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    Cited by:

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    2. Carl Singleton & J. James Reade & Johan Rewilak & Dominik Schreyer, 2021. "How big is home advantage at the Olympic Games?," Economics Discussion Papers em-dp2021-13, Department of Economics, University of Reading.
    3. Pedro Janela Pinto & Gustavo Lopes dos Santos, 2022. "Olympic Waterfronts: An Evaluation of Wasted Opportunities and Lasting Legacies," Sustainability, MDPI, vol. 14(4), pages 1-32, February.
    4. Sven Daniel Wolfe, 2023. "Building a better host city? Reforming and contesting the Olympics in Paris 2024," Environment and Planning C, , vol. 41(2), pages 257-273, March.
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    6. Josh Matti & Yang Zhou, 2022. "United we feel stronger? On the Olympics and political ideology," Economics of Governance, Springer, vol. 23(3), pages 271-300, December.
    7. Kathleen Rodenburg & Louise Hayes & Lianne Foti & Ann Pegoraro, 2021. "Responsible Leadership in Sport: An Ethical Dilemma," Societies, MDPI, vol. 11(3), pages 1-17, July.
    8. Gustavo Lopes dos Santos & Rosário Macário & Marie Delaplace & Stefano Di Vita, 2022. "The Long-Standing Issue of Mobility at the Olympics: From Host Cities to Host Regions in the Ongoing Case Study of Milan–Cortina 2026," Sustainability, MDPI, vol. 14(2), pages 1-24, January.
    9. Eiji Yamamura, 2021. "Do You Want Sustainable Olympics? Environment, Disaster, Gender, and the 2020 Tokyo Olympics," Sustainability, MDPI, vol. 13(22), pages 1-14, November.

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