Economic Tidbits of Sporting Events

Sporting events attract fans and fan loyalty. As a matter of fact, across countries and provinces and towns sports can be great unifier and great divider. It is a paradox of sorts yet a fact. There is a loyalty towards a team and as the two teams or two individuals compete for a prize in their sporting event at different layers, the loyalty translates into an emotional outpouring of support which in itself is competitive. The emotions that come out from the rival supporters create divisions often difficult to heal at times.

Each sporting event is a competition for a trophy. The trophy is inelastic conceivably to a large degree. There is just one prize on offer and just because many compete, the number of winners on offer doesn’t increase. The winner gets the rewards disproportionate to the others and thus most sought for. This operates at every layer. Even in the schools, the inter-school competition within the city or the sub-district or the district are the most sought after. As one increases the competitive nature and expands the geographic scope, the rewards too increase. It is a tournament wherein it becomes a winner take all. The multi sporting events like Olympics become the ultimate prize in this tournament that perhaps begin at level of a primary school or a locality or a ward or a village. Each one must progress through these layers to reach the apex that happens through victories in World Cup or the Olympics.

Many sports are individual while equal number are team oriented. Team sports might range from 2 to even around 20 in some cases. Some events like cycling tours are actually individual with a team at hand to help them win over the others. Sports like lawn tennis, badminton might be individual but sports like soccer are team driven at club or national level. Cricket it is often said is an individual sport disguised as a team sport.  The frequency of these sporting contests too vary in duration. In lawn tennis, there is annual grand slam tournaments as do golf. Badminton has its All England while squash has its British Open while snooker has its equivalent in Crucible theatre World Championship. Many of these have historical significance. Cricket has its prestigious One Day World Cup as also the more recent the T20I World Cup. They have started Test Match World Cup Cycle. Similarly athletics and swimming have their World Cups at regular intervals. Hockey has its World Cup every four years. Soccer has strong club league with championship final every year while for the nations, the most elite event, the World Cup happens once in four years. Similar occurrences happen for each sport which one can guess to be more than 2000 or so at least being competed at global or semi-global level. Besides there are events like Indian Premier League (cricket), National Football League (American football), Major League Baseball, National Hockey League (ice hockey) among others. For martial arts, many of them have championship fights are frequent intervals for different categories. The popular ones generally are from professional boxing and mixed martial arts.

Each one has a trophy at a centre for the winners which gain rewards disproportionate to the rest. Without these rewards, people do not respond to the incentives in the same fashion as they do with those rewards that are scarce and inelastic. In fact sporting events have vertical supply curves. There can be just one Wimbledon champion every year as there can be just one world cup soccer champion every four years. The vertical supply curve with the honours associated with the same creates the incentives. To a Formula One World Tour or the English Premier Soccer league, going through the tour and the matches and emerging winners has a glamour and achievement orientation towards it. From the fan’s point of view too, there is significant economics associated with it.

Sports compete with each other for fan’s attention. The attention is scarce and has to be divided among multiple tasks. It is just not sports but in each is a demand for many other entertainment products. The fan attention is spread over the different sports and other entertainment and art offerings through the principle of equimarginal utility. The marginal utility generated through watching a sporting event and thus cheering for your team is linked to the amount of time and resources spent on watching the same. This can be monetized through a cost benefit analysis. The costs would be the alternative foregone including time that could have used for work and other leisure. The benefits is the additional satisfaction that is generated by observing and cheering the sport. The ratio of marginal utility or additional satisfaction derived from watching every additional moment of sporting action to the last monetized unit spent on watching the action is equal across all such activities undertaken by an economic agent. The more frequent the event, the less the additional satisfaction generated by watching the sport. Thus an Olympics being held every four years generate an attraction that is rarely able to be matched by the rest. The World Cup football organized in four years thus creates an aura else the additional satisfaction would simply diminish if the frequency is reduced to a shorter cycle. A longer cycle too would create a sort of diminishing returns especially when a career life cycle of sportsman is quite limited.

As we thus observe, the law of diminishing marginal utility linked with the law of equi-marginal utility determines the frequency of sporting events. In sports like lawn tennis, where tournaments happen through the year, some significant higher rated grand slam events capture attention from both fans and players alike thus reflecting the economic concepts discussed above.

Prima facie, there might not be anything special to these sporting events in terms of frequency of organization but digging deeper, the inelastic supply creating a vertical supply curve, incentive mechanism driven by this inelasticity, the application of equi-marginal utility in terms of capturing fan attention and loyalty all go deep in economic analysis of sporting events. Going further, the number of sports and events in multi-sporting events like Olympics, Asian Games, World Games, etc. too are linked to the same concept of equi-marginal utility. The explanation for this will have to wait for some other day.