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Rule changes and competitive balance in Formula One motor racing

Author

Listed:
  • Camilla Mastromarco
  • Marco Runkel

Abstract

This article provides an economic explanation of the frequent rule changes in the Formula One (F1) motor racing series. In a two-stage model, the FIA (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 to 2005, which supports the main implications of the model.

Suggested Citation

  • Camilla Mastromarco & Marco Runkel, 2009. "Rule changes and competitive balance in Formula One motor racing," Applied Economics, Taylor & Francis Journals, vol. 41(23), pages 3003-3014.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:23:p:3003-3014
    DOI: 10.1080/00036840701349182
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    1. repec:bla:stratm:v:38:y:2017:i:7:p:1455-1477 is not listed on IDEAS
    2. Marco Di Domizio & Mattia Palombini, 2011. "Competitività orizzontale e verticale nel ciclismo professionistico: alcune riflessioni sul circuito pro tour," Rivista di Diritto ed Economia dello Sport, Centro di diritto e business dello Sport, vol. 6(3), pages 35-54, Febbraio.
    3. Langen, Martin & Krauskopf, Thomas, 2010. "The election of a world champion," CAWM Discussion Papers 39, University of Münster, Center of Applied Economic Research Münster (CAWM).
    4. Krauskopf, Thomas & Langen, Martin & Bünger, Björn, 2010. "The search for optimal competitive balance in formula one," CAWM Discussion Papers 38, University of Münster, Center of Applied Economic Research Münster (CAWM).
    5. Kenneth Linna & Evan Moore & Rodney Paul & Andrew Weinbach, 2014. "The Effects of the Clock and Kickoff Rule Changes on Actual and Market-Based Expected Scoring in NCAA Football," International Journal of Financial Studies, MDPI, Open Access Journal, vol. 2(2), pages 1-14, April.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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