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Rule Changes and Competitive Balance in Formula One Motor Racing

Author

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  • Mastromarco, Camilla
  • Runkel, Marco

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.

Suggested Citation

  • Mastromarco, Camilla & Runkel, Marco, 2004. "Rule Changes and Competitive Balance in Formula One Motor Racing," Discussion Papers in Economics 386, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:386
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    File URL: https://epub.ub.uni-muenchen.de/386/1/MastromarcoRunkel.pdf
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    References listed on IDEAS

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

    1. 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).
    2. 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).
    3. 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.
    4. 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.

    More about this item

    Keywords

    Formula One ; Competitive Balance ; Contest;

    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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