Economic Impact of Mega-Events

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Questions and Answers

What is the potential economic impact of road closures associated with a large-scale sporting event?

Increased tourist spending due to the event.

No significant impact on local businesses as they will adapt.

Increased revenue for local businesses due to increased foot traffic.

Reduced revenue for local businesses due to hindered access and operations. (correct)

What economic effect is described by the concept of "crowding out" in relation to mega-events?

The decline in visitors to a city due to the increased cost of living.

The influx of new visitors and economic activity driving out local businesses.

The competition between local businesses and international corporations for profits generated by the event.

The displacement of regular tourists by sports fans during a mega-event, leading to a net loss of tourism. (correct)

How do the economic benefits of a mega-event, such as the Olympics, compare to the impact on regular tourism?

Mega-events typically lead to a surge in tourism revenue that outweighs any potential losses from displaced regular tourists.

Mega-events have no significant impact on regular tourism, as both groups of visitors spend money in diverse sectors.

The decrease in regular tourism due to a mega-event often exceeds the influx of visitors to the event. (correct)

Mega-events always provide a net economic gain, outweighing any decrease in regular tourism.

What is the main concern regarding the use of multipliers in economic impact analysis of mega-events?

Multipliers are based on normal economic conditions, which may not accurately reflect the unique factors of a mega-event. Signup and view all the answers

What is a "leakage" in the context of economic impact analysis?

The loss of economic benefits generated by a mega-event due to reduced local spending. Signup and view all the answers

How do inflated hotel prices during a mega-event influence the local economy?

They mainly benefit corporations owning the hotels rather than the local economy. Signup and view all the answers

What is a potential negative consequence of a city importing labor to meet the demands of a mega-event?

The imported labor force takes their wages with them when the event ends, reducing the long-term economic impact. Signup and view all the answers

Which of the following is NOT a valid concern regarding the economic benefits of mega-events?

The possibility of large-scale environmental damage and pollution caused by the event. Signup and view all the answers

What year did the first modern Olympic Games take place?

1896 Signup and view all the answers

How many athletes competed in the first modern Olympic Games?

250 Signup and view all the answers

What type of medal did winners receive at the first modern Olympic Games?

Silver medals Signup and view all the answers

In which year did the Winter Olympics first take place?

1924 Signup and view all the answers

Which athlete was stripped of his gold medals due to amateurism violations?

Jim Thorpe Signup and view all the answers

What was a significant change regarding athlete participation by 1984?

Many best athletes were no longer amateurs. Signup and view all the answers

How does the International Olympic Committee (IOC) select a host city?

Through a bidding process Signup and view all the answers

Where was the first modern Olympic Games held?

Athens Signup and view all the answers

What was the projected number of visitors for the game in New York, which may be considered overly optimistic?

400,000 Signup and view all the answers

Which factor is NOT mentioned as a reason for potential overestimation of economic impact from a sporting event?

Inflation impact Signup and view all the answers

What is the substitution effect in relation to local economic spending during a sporting event?

Spending is reallocated within the local economy Signup and view all the answers

What percentage of Super Bowl tickets are allocated to the host team?

5% Signup and view all the answers

What phenomenon describes visitors coming earlier to a city for a sporting event than they originally planned?

Time-switching Signup and view all the answers

How does crowding out affect economic activity during mega-events?

It reduces capacity for other activities Signup and view all the answers

What is the primary characteristic of mega-events compared to typical sporting events concerning fan attendance?

Greater number of out-of-town visitors Signup and view all the answers

What impact typically occurs when a large sporting event, like the Boston Marathon, takes place in an urban area?

Significant congestion and crowding Signup and view all the answers

What was the original cost of the Olympic Stadium in London?

$360 million Signup and view all the answers

What was the cost of converting the Olympic Stadium into a football stadium?

$350 million Signup and view all the answers

How much did West Ham United pay towards the conversion of the Olympic Stadium?

$20 million Signup and view all the answers

What is one potential benefit of a mega-event like the Olympics?

It generates the political will to undertake needed infrastructure investments. Signup and view all the answers

What is the opportunity cost of using public money for a mega-event?

It is the cost of the alternative project that could have been done with the public money. Signup and view all the answers

Which of the following is a negative impact of holding a mega-event according to the text?

Mega-events can result in a decrease in national output. Signup and view all the answers

According to the study by James Giesecke and John Madden, how did the 2000 Summer Olympic Games impact household consumption in Australia?

Household consumption was lower due to the games. Signup and view all the answers

What is one example of how a mega-event can increase the profile of a city?

A mega-event can create a platform to showcase the city's cultural attractions. Signup and view all the answers

What makes it politically and legally difficult for a city to back out of hosting an event after signing a contract?

The fixed deadlines that are set years in advance. Signup and view all the answers

Which requirement does NOT need to be fulfilled by a country hosting the World Cup?

Ensuring the stadiums are owned by the host country. Signup and view all the answers

Why do organizing committees often agree to the demands of FIFA and the IOC?

They are solely responsible for operating expenses. Signup and view all the answers

What advantage do the IOC and FIFA gain from the all-or-nothing model of bidding?

They can set both the price and the number of events. Signup and view all the answers

How must stadiums used for the World Cup cater to fan capacity?

Each stadium must hold between 40,000 to 80,000 fans. Signup and view all the answers

What is a common misconception about the reasons cities bid for hosting mega-events?

Cities can choose which games to host. Signup and view all the answers

What is one consequence of having to fulfill the extensive requirements set by FIFA and the IOC?

Cities risk financial strain and overshooting budgets. Signup and view all the answers

What type of facilities are required for each team during the World Cup?

Individual base training sites, plus additional training sites at each stadium. Signup and view all the answers

What is a non-economic reason for cities to bid to host mega-events?

To gain international recognition and promote national identity Signup and view all the answers

Which of the following is NOT a reason why a city might gain from hosting a mega-event?

A significant decline in the cost of living for residents Signup and view all the answers

Which of the following events is explicitly cited in the content as an example of a city using a mega-event to demonstrate its economic and political power?

The 2014 Winter Olympics in Sochi, Russia Signup and view all the answers

Based on the text, why would a city hosting the Champions League final prefer to have their hometown team win the championship?

It would provide a stronger economic boost for the city. Signup and view all the answers

Based on the information presented, which of the following events has been found to have a measurable positive impact on citizen happiness?

The 2006 World Cup in Germany Signup and view all the answers

Which of the following is NOT a reason why cities continue to bid for mega-events despite potential economic risks?

To ensure that the event is held in a city with a strong sports culture and infrastructure. Signup and view all the answers

What is the main idea conveyed by the statement that the 2008 Summer Olympics in Beijing were "seen as a signal to the world that China had arrived as a global leader"?

The Olympics can be used as a platform to demonstrate a country's growing economic and political influence. Signup and view all the answers

Study Notes

Economics of Sports Mega-Events

Mega-events are characterized by several factors that differentiate them from other sporting events:
- They occur irregularly or infrequently.
- They command high public interest and media attention, especially at the national or international level.
- They attract participants or spectators from outside the local region.
Size is not the sole factor determining if a sporting contest qualifies as a mega-event.
Examples of mega-events include:
- Summer and Winter Olympic Games
- World Cups in various sports (football, rugby, cricket)
- Champions League Final
- Super Bowl
- All-Star games in major sports
- US Open golf tournament
- NCAA championships (basketball and football)
Other mega-events change locations based on participating teams (World Series, Stanley Cup, NBA Finals).
- Some mega-events always take place in the same location but annually (Grand Slam tennis tournaments, College Bowl games, major marathons, auto races, horse races).
The ancient Olympics, a set of Greek athletic contests, included the Pythian, Nemean, and Isthmian Games.
- The Olympics were first held in 776 B.C. and continued every four years for over a millennium to honor the Greek god Zeus.
The modern Olympic Games:
- The first modern Olympics were held in Athens in 1896, with 14 nations and fewer than 250 athletes.
- Winners received silver medals, runners-up got copper.
- In 2024, over 10,000 athletes representing 204 countries participated in 329 individual events across 32 sports in Paris.
  - The Winter Olympics have been held since 1924.
  - In 2022, Beijing hosted nearly 3,000 athletes from 91 countries in 109 events, 15 disciplines in 7 sports.
- Early Olympics only allowed amateurs to participate
  - Jim Thorpe, a prominent athlete, was stripped of medals after being discovered to have earned money before his Olympic appearance.
The FIFA World Cup is another major international mega-sporting event.
- The English Football Association was formed in 1863.
- The first international football match was between Scotland and England in 1872.
- FIFA (Fédération Internationale de Football Association) was created in 1904 by seven European football associations.
The IOC (International Olympic Committee) selects host cities through a lengthy, costly process roughly six years before the event. Historically, the Games were held in the wealthiest countries (Western Europe and the U.S).
- Currently, more bids are coming from outside of Western Europe, Japan, Australia, Canada, and the U.S.
- Mexico City, Moscow, and Sarajevo acted as host cities.

Short-Run Benefits of Hosting Mega-Events

Expected revenue from events and tourists
Consultants often produce economic impact studies to show the significant benefits for the host city.
In most cases, the sanctioning body (IOC, FIFA, NFL, etc.) controls the revenue.
Short-run benefits are often very similar to those from teams: ticket sales, media rights, venue-related revenues, and sponsorships.
Much of the direct revenue generated from hosting does not stay in the host city.
Money from tickets, concessions, and parking typically goes to the respective organization and not to the local organizers.

Problems with Ex-Ante Economic Impact Studies

Unrealistic projections of the number of visitors or their spending
The substitution effect (spending is reallocated rather than generated)
Crowding out (event crowds displace other economic activities)
Leakages (profits leave the local economy)

Long-Run Benefits of Hosting Mega-Events

Infrastructure Improvements: The construction of new facilities may have positive returns.
Advertising and Branding: Mega-events can boost the profile of the city as a tourist destination.
Problems with bidding processes:
There may be high cost competition among cities.
Cost overruns due to unforeseen changes or difficulties executing the planned improvements.
Corruption in bidding.
The desire to demonstrate national prestige (the Olympics and World Cup).
Host countries might spend more than anticipated for several reasons.

Costs of Hosting Mega-Events

Infrastructure to accommodate tourists and athletes
Building hotels and transportation networks
Construction of sporting facilities

Why Do Cities Continue to Bid?

Institutional reasons: once a deal is struck, it is difficult to reverse.
Legal and political obstacles to canceling.
Organizing committees are typically willing to accede to such demands because their costs are often limited to operational expenses associated with staging the events.
The cost of providing the infrastructure for the events is typically left to the host city or country.
All-or-nothing demand curve: to host any event, a city needs to stage every event.
Winner's curse: high bids to win the rights to host and possible overestimation of the value or expected benefits.

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Description

This quiz explores the economic implications of large-scale sporting events, focusing on the benefits and drawbacks of mega-events like the Olympics. Questions cover concepts such as crowding out, leakage, and the overall effect on local tourism and economies. Test your knowledge on both economic theory and historical facts related to these significant events.