The Bidding Paradox: Why Rational Politicians Still Want to Bid for Mega Sports Events

Abstract

This paper discusses reasons why politicians still favor hosting mega events despite the discouraging evidence regarding their financial benefits: (1) early political enthusiasm, (2) tying side-projects to the bid to raise political support, (3) biased reading of history, (4) the winners curse, (5) redistribution and lobbying, (6) a media bias in favor of hosting and (7) boosting happiness and pride of residents. Bringing happiness to the people might be a valid reason for hosting a mega event, however, economists are yet insufficiently capable of capturing this effect. Moreover, alternative explanations for political support cannot be deemed invalid ex ante.

Keywords: bidding, mega sport events, Olympic games, lobbying, happiness

JEL Classification: D61, D72, H54, L83