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


  • Wladimir Andreff

    () (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)


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.

Suggested Citation

  • Wladimir Andreff, 2012. "The winner's curse: why is the cost of sports mega-events so often underestimated?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00703466, HAL.
  • Handle: RePEc:hal:cesptp:halshs-00703466
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    References listed on IDEAS

    1. 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, vol. 44(1), pages 59-75, March.
    2. Bruce K. Johnson & Peter A. Groothuis & John C. Whitehead, 2001. "The Value of Public Goods Generated by a Major League Sports Team," Journal of Sports Economics, , vol. 2(1), pages 6-21, February.
    3. Victor Matheson, 2009. "Economic Multipliers and Mega-Event Analysis," International Journal of Sport Finance, Fitness Information Technology, vol. 4(1), pages 63-70, February.
    4. Harry Walton & Alberto Longo & Peter Dawson, 2008. "A Contingent Valuation of the 2012 London Olympic Games," Journal of Sports Economics, , vol. 9(3), pages 304-317, June.
    5. Wolfgang Maennig, 2002. "On the Economics of Doping and Corruption in International Sports," Journal of Sports Economics, , vol. 3(1), pages 61-89, February.
    6. 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 0014, East Carolina University, Department of Economics.
    7. Swantje Allmers & Wolfgang Maennig, 2008. "South Africa 2010: Economic Scope and Limits," Working Papers 021, Chair for Economic Policy, University of Hamburg.
    8. 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, vol. 118(2), pages 171-187.
    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, vol. 2(3), pages 149-160, August.
    10. Robert A. Baade & Victor A. Matheson, 2001. "Home Run or Wild Pitch?," Journal of Sports Economics, , vol. 2(4), pages 307-327, November.
    11. Levis, Mario, 1990. "The Winner's Curse Problem, Interest Costs and the Underpricing of Initial Public Offerings," Economic Journal, Royal Economic Society, vol. 100(399), pages 76-89, March.
    12. Rock, Kevin, 1986. "Why new issues are underpriced," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 187-212.
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    Blog mentions

    As found by, 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 18:36:00
    2. [経済]オリンピック招致合戦なんかいらない
      by himaginary in himaginaryの日記 on 2012-07-25 12:00:00

    More about this item


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

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