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Contemporary Research in Sports Economics

Proceedings of the 5 th ESEA Conference


Oliver Budzinski and Arne Feddersen

This volume comprises scientific contributions in the context of the 5th annual conference of the European Association of Sports Economics (ESEA), which took place in September 2013 in Esbjerg, Denmark. It contains five articles on UEFA’s financial fair play regulation in European football, written by internationally renowned sports economists like Stefan Szymanski, Joel Maxcy and Sean Hamil. Moreover, a further three chapters deal with football topics like the dismissal of coaches or competitive balance. Furthermore, the economics of sports events – the Olympics as well as local events – are analyzed by well-known scholars like Wladimir Andreff and Plácido Rodríguez. Next to team sports, new developments of the economics of individual sports like cycling, ski-jumping and motor-racing are explored.
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The Winner’s Curse in Sports Economics


A sports entity often maximizes its monopoly rent in creating an auction-like situation among competing agents for its exclusive product. The latter overbid up to the most optimistic bidder’s price. Here comes the winner’s curse whenever the market value of the auctioned object is unknown ex ante. The most optimistic bidder wins the bid and its actual net revenues will be lower than expected. A winner’s curse occurs in bids for hosting a mega-sporting event, when several cities compete to host a team franchise, TV channels bid for a league’s broadcasting rights, and teams overbid for recruiting a same free agent or superstar player.

winner’s curse, auction bid, cost overruns, asymmetric information, sports economics.

In any auction-type setting where the value of the auctioned object is uncertain but will turn out to be the same for all bidders, the party that overestimates the value of the object is likely to outbid its competitors and win the contest. This defines a common value auction1 where the item to be sold has a single objective value for all bidders, but this true value is unknown. Each bidder has to guess the item’s true value at the time of bidding on basis of the information that is available, and without knowing the other’s guesses. The items won are more often than not those whose value has been overestimated. The winner’s curse occurs in common value auctions when bidders fail to account for the fact that the winner’s valuation of...

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