18 - Public Sports Public Policymaking Flashcards
What is one possible (but unlikely) reason officials keep funding sports despite low ROI?
That non-economic benefits (e.g. civic pride, culture) are larger than we can measure — but this is not strongly supported by CVM studies.
How might voter ignorance influence sports subsidies?
Voters may not understand the real cost or believe inflated economic benefits, enabling politicians to disguise subsidies or promote weak economic cases.
Why might concentrated benefits lead to persistent subsidies?
Teams and owners benefit significantly and have strong political influence, while the costs are spread thinly among taxpayers who are less organized.
Maybe those who benefit wield more political influence than those who lose?
– Possible, since benefits may be highly concentrated (e.g. team, owners) while costs are distributed (e.g. all taxpayers).
What does the ‘all-or-nothing’ demand problem mean in sports policy?
Cities cannot buy part of a team/event, so even if the optimal investment is less than one full team, they must choose between full funding or none.
Maybe optimal quantity lies in- between on all-or-nothing demand curve.
– Cities generally can’t bargain to have half a sports franchise, or mega-event. So what if optimal quantity is less than one, but with some uncertainty?
Can voters re-elect politicians who pass bad sports policies?
Yes — due to limited info, emotional attachment to teams, and misleading political framing.
What is Bayesian persuasion in this context?
A model where voters learn about politician competence based on signals like landing or losing a team, not purely from economic outcomes.
Voter are trying to determine the quality/competence of politicians. They take informational cues from the state of the world.
Landing/losing a sports team affects the learning of voters, making them more/less likely to form a favorable impression.
Why might voters support a failing sports subsidy policy?
Because they interpret team acquisition as a sign of effective leadership, even if the policy fails a cost-benefit test.
Even though investment knowingly fails cost/benefit test, voters have to consider incumbent competence and what they’ve learned.
What kind of ‘learning’ do voters engage in under this model?
They use the state of the world (e.g., presence of a franchise) as an informational cue about a politician’s ability or effort.
What is the pandering/credit-claiming theory?
other theories of over- subsidization.
Politicians fund teams to look like they tried, even if they know the project is inefficient.
Politician subsidizes to appear like they “tried”
What is the information revelation theory?
other theories of over- subsidization
Politicians in trouble may take bold action — like funding stadiums — as a ‘Hail Mary’ to gain attention or support.
Politicians throw information “hail marys” when they are in electoral trouble
How does competition theory explain overspending?
other theories of over- subsidization
In fierce bidding wars between cities, the winner may overpay, experiencing a winner’s curse.
Politicians suffer from “winners curse”
The winner of a competitive bidding process ends up overpaying — often because they were the most optimistic (or aggressive) about the value of the prize.
- Cities bidding for sports franchises or mega-events (like the Olympics or World Cup) often offer huge subsidies, tax breaks, or infrastructure support.
- Because of intense competition, the “winner” city ends up committing more resources than the event is worth economically.
- This leads to budget overruns, underused stadiums, or public backlash.
How can exchange rates affect sports leagues like the NHL?
If the Canadian dollar weakens, Canadian teams suffer since revenues are in CAD but salaries are paid in USD.
What is the connection between oil prices and exchange rates?
In oil-based economies (like Alberta), low oil prices weaken the local currency, making it more expensive to run sports franchises.
How did the Rogers TV deal impact the NHL?
league’s media exposure across the country.It was expected to stabilize Canadian teams’ finances, increase revenue, and expand the league’s media footprint.
summary: In 2013, Rogers signed a 12-year, $5.2 billion deal for exclusive NHL broadcasting rights in Canada.
Expected Impact: The deal was expected to significantly boost NHL revenues, especially for Canadian teams, and strengthen the league’s media exposure across the country.
The Rogers TV deal was a massive 12-year, $5.2 billion agreement signed in 2013 that gave Rogers exclusive national broadcasting rights for the NHL in Canada, aiming to boost league revenues and expand its media presence.
What major contracts did the Blackhawks sign in 2015?
They gave long-term, high-value contracts to stars Toews and Kane after a successful championship run.
summary: In 2014, the Blackhawks signed Jonathan Toews and Patrick Kane to identical $84 million contracts over 8 years.
Assessment: Given the macroeconomic uncertainty (e.g., currency risk, oil price fluctuations, salary cap constraints), these contracts were seen as high-risk, potentially limiting Chicago’s financial flexibility in later years.
What were the team’s results before those contracts (2007–2015)?
Blackhawks
3 Stanley Cups, 3 Finals, 4 Conference Finals, 18 playoff rounds won.
What were the results after the contracts (2015–2023)?
Blackhawks
0 Stanley Cups, 0 Finals, 3 playoff appearances, No playoff rounds won.
Who did the Blackhawks give up to manage salary cap space?
Players like Brandon Saad, Patrick Sharp, Andrew Shaw, Teuvo Teravainen, and others.
What broader lesson does this case illustrate about sports economics?
That long-term star contracts can lead to cap inflexibility and team decline, even after peak success.
Why is it hard to win with $10M+ players under the salary cap?
High salaries for a few players reduce flexibility, limiting roster depth and increasing risk of underperformance.
What was the first team to win a playoff series with a $10M+ player?
Montreal Canadiens in 2021.
What was the first team to win a Stanley Cup with a $10M+ player?
Vegas Golden Knights in 2023.
What is a teaching case?
A real-world example or scenario designed to illustrate economic concepts in a way that facilitates classroom discussion.
What are key components of a teaching case?
Context & background, A central protagonist or decision-maker, A problem or trade-off that needs to be analyzed.
