Monday, November 7, 2016

Bounded rationality incentives and institutions in sport: links and lessons

I am putting together three topics for my part of the course on the economics of sport at the joint Johan Cruyff and UAB new master on sports management: institutions, incentives and rationality. What is the link? Bounded rationality fans exert a lot of pressure and experience sport fandom as addictive (not very rational). That is behind some inefficiencies such as an inefficient transfer market and hugely inefficient mega-sports events. Players and managers respond to incentives (both extrinsic and intrinsic), which implies that with increasing stakes (three points per victory, larger markets) they have incentives to win by any means, which involves higher quality perhaps but also more incentives for doping and corruption. Governing bodies and holders of the rights of tournaments have incentives to put together bigger and better tournaments (more teams in the world cup), which means more temptations to corrupt themselves. Since some of these governing bodies are global unregulated monopolies (FIFA, IOC), the only thing we have to constrain them is the FBI, Swiss Courts and perhaps the reputational concerns of sponsors. At least until we wait for a global democratic and federal government...

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