Rule Changes and Competitive Balance in Formula One Motor Racing

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Rule Changes and Competitive Balance in Formula One Motor Racing

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Mastromarco, Camilla
Runkel, Marco

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Marco Runkel

Abstract

This paper provides an economic explanation of the frequent rule changes in the Formula One (F1) motor racing series. In a two-stage model, the FIA (as the organizer of the F1) first decides whether to change the rules or not, and then the racing teams compete in a contest. It turns out that a rule change reduces the teams' performances, but also improves competitive balance between the teams. The rule change is implemented, if the FIA's revenue gain from the latter effect overcompensates the FIA's revenue loss from the former effect. We provide empirical evidence from F1 seasons in the period 1950-2003 which supports the main implications of the model.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 386.

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Date of creation: Jun 2004
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Handle: RePEc:lmu:muenec:386

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Recreation; Tourism

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-07-04 (All new papers)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Marco Runkel, 2003. "Optimal Contest Design when the Designer's Payoff Depends on Competitive Balance," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
Other versions:
- Marco Runkel, 2004. "Optimal Contest Design When The Designer's Payoff Depends On Competitive Balance," Royal Economic Society Annual Conference 2004 156, Royal Economic Society. [Downloadable!]
Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November. [Downloadable!] (restricted)

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