Rule Changes and Competitive Balance in Formula One Motor Racing
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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- 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.
- Marco Runkel, 2003. "Optimal Contest Design when the Designer’s Payoff Depends on Competitive Balance," CESifo Working Paper Series 1009, CESifo Group Munich.
- Craig A. Depken, II, 2002. "Free Agency and the Concentration of Player Talent in Major League Baseball," Journal of Sports Economics, The North American Association of Sports Economists, vol. 3(4), pages 335-353, November.
- Dasgupta, Ani & Nti, Kofi O., 1998. "Designing an optimal contest," European Journal of Political Economy, Elsevier, vol. 14(4), pages 587-603, November.
- Brad R. Humphreys, 2002. "Alternative Measures of Competitive Balance in Sports Leagues," Journal of Sports Economics, The North American Association of Sports Economists, vol. 3(2), pages 133-148, May.
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