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The winner's curse: why is the cost of sports mega-events so often underestimated?

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  • Wladimir Andreff

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

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    Abstract

    Auction theory, when the bidders do not know the value of what is auctionned, is used to explain how the Olympic Games are allocated to competing bidding cities. It is a centralized allocation process with asymmetric information which usually comes out with a winner's curse. Various indicators of the latter are proposed and exemplified, the major one being the systematic ex ante underestimation of the Olympics costs.

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    File URL: http://halshs.archives-ouvertes.fr/docs/00/70/34/66/PDF/Definitely_4_Andreff_in_Maennig-Zimbalist_final_clean_copy_last_revision_August.pdf
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    Bibliographic Info

    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00703466.

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    Date of creation: 2012
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    Publication status: Published, International Handbook on the Economics of Mega Sporting Events, Edward Elgar (Ed.), 2012, 37-69
    Handle: RePEc:hal:cesptp:halshs-00703466

    Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00703466
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    Web page: http://hal.archives-ouvertes.fr/

    Related research

    Keywords: auctions; bids; winner's curse; asymmetric information; cost underestimation; mega sporting events; Olympics;

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    1. Bruce K. Johnson & Peter A. Groothuis & John C. Whitehead, 2000. "“The Value of Public Goods Generated by a Major League Sports Team: The CVM Approach,”," Working Papers, East Carolina University, Department of Economics 0014, East Carolina University, Department of Economics.
    2. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, Elsevier, vol. 15(1-2), pages 187-212.
    3. Swantje Allmers & Wolfgang Maennig, 2008. "South Africa 2010: Economic Scope and Limits," Working Papers 021, Chair for Economic Policy, University of Hamburg.
    4. Wolfgang Maennig, 2002. "On the Economics of Doping and Corruption in International Sports," Journal of Sports Economics, , , vol. 3(1), pages 61-89, February.
    5. Victor Matheson, 2004. "Economic Multipliers and Mega-Event Analysis," Working Papers, College of the Holy Cross, Department of Economics 0402, College of the Holy Cross, Department of Economics.
    6. Levis, Mario, 1990. "The Winner's Curse Problem, Interest Costs and the Underpricing of Initial Public Offerings," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(399), pages 76-89, March.
    7. Arne Feddersen & Wolfgang Maennig & Philipp Zimmermann, 2008. "The empirics of key factors in the success of bids for olympic games," Revue d'économie politique, Dalloz, Dalloz, vol. 0(2), pages 171-187.
    8. Robert A. Baade & Victor A. Matheson, 2001. "Home Run or Wild Pitch?," Journal of Sports Economics, , , vol. 2(4), pages 307-327, November.
    9. Matthew Walker & Michael J. Mondello, 2007. "Moving Beyond Economic Impact: A Closer Look at the Contingent Valuation Method," International Journal of Sport Finance, Fitness Information Technology, Fitness Information Technology, vol. 2(3), pages 149-160, August.
    10. Giliberto, S Michael & Varaiya, Nikhil P, 1989. " The Winner's Curse and Bidder Competition in Acquisitions: Evidence from Failed Bank Auctions," Journal of Finance, American Finance Association, American Finance Association, vol. 44(1), pages 59-75, March.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why are Olympic Games always more expensive than planned?
      by Economic Logician in Economic Logic on 2012-07-05 13:36:00
    2. [??]?????????????????
      by himaginary in himaginaryの日記 on 2012-07-25 07:00:00

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