University of Zagreb

Faculty of Economics and Business

Mega Events

Leonor Ferreira (0067655493)

Sports Economics

Academic year 2021/2022

Winter Semester

Professor: Tomislav Globan

1) Use the all-or-nothing demand curve to explain why the IOC is unlikely to accept
a bid by Los Angeles to host only the track and field (athletics) events and basketball
tournament in its bid for the 2028 Summer Olympics.
The bid by Los Angeles, which consists in only hosting the track and field events and
the basketball tournaments in the 2028 Summer Olympics is not beneficial for the IOC
because they will loose the advantage of being able to set both price and quantity.
In a typical monopoly, where the monopolist
can only set the price or quantity, if the
monopolist set the price at p1 its power is
restricted by the demand curve, so the
consumers will only buy Q1 at the price p1
which will result in a consumers surplus of ACE.
But the IOC by imposing a all-or-nothing
demand curve can set both the piece at p1 and
the quantity at Q2, which represents hosting
all the events, will make the city choose
between hosting all events at price p1 which is
larger than the price they were willing to pay
for that quantity or not organizing the
Olympics at all. The city will choose to host the
Olympics if the loss EFG of hosting more events that they wanted at that price is
smaller than the surplus for the city, ACE.
We can conclude that the IOC benefit by imposing that cities host all events or none,
because it will make the city consume more sports that they want which will take
away some part of the consumer surplus due to the fact that residents from the
hosting city will have at this quantity (all events) pay more than is worth to them for
the additional quantity.
2) If you had a choice, would you rather your city (or the nearest large city)
permanently host a major sports club or a one-off mega-event such as the World Cup
or Olympics? Why?
I'd rather my city to have a regular major sports club, because a mega event such as
the world cup or the Olympics, despite having some benefits as it generates a large
flow of people for the hosting city, which would improve the economy in various
sectors, for instance, hospitality, transportation, the bar and restaurant sector and
lastly the construction companies would also benefit from this, as most likely new
infrastructure would have to be built. Furthermore, on the long run, mega events
usually leave benefits for the hosting city, namely, sports facilities that can be
converted for other purposes. Apart from this the city will most like become well
known around the world, due to advertising.
On the other hand, a mega event also brings disadvantages, the lasting impacts on the
economy aren't that important, as most revenues from the mega events tend not to
stay in the hosting city. Secondly the city itself, usually needs to invest large funds in
infrastructures that maybe or may not have utility after de mega event, as most of
these are made for one purpose only, and even if the city attempts to convert them,
this can come quite costly. Not only this, but the large flow of people require
investments in management, security, accommodation and transportation to meet
demand in the short period of time.
As for the downsides of having a major sports club, are similar but less impactful than
those of a mega event, for instance, a major sports club only needs a stadium, and it is
used and maintained for a long time, and even thought game days generate big
crowds, it usually nothing compared to mega events. Apart from this having a sports
club in my hometown tends to makes us feel better and more attached, passing even
through generations, on the contrary a mega event despite creating a sense of pride
for the city, it only happens once.