Game Theory: Effect of Big Sporting Events on National Economics

Whenever there is money involved , the radars of economists start working. On this ground, games like olympic games and Commonwealth games are the areas which involve heavy investment and spending. Winning a bid for the game is a prestigious matter itself, barack obama will certainly testify that.

In order to flaunt their countries economic and social status, the spending on these games are gradually reaching astronomical figures. The Beijing Olympics spending Budget ,$40 Million, was more than the GDP of Srilanka (source: Bloomberg.com). The festive mood of the public and the government is the common feature of all the major games, but are they really economically viable. Is the level of spending justified for a nation? Lets have a look on it. I will judge it on the basis of 4 Parameters , that are considered the sacrosanct part of hosting Games

Infrastructre
Infrastructure is something on which countries start working long before they bid for games. They want to leverage on the infrastructure they have and the potential infrastructure which they can develop. But a cost-benefit analysis by Darren Mchugh ,a queensland unversity scholar, shows that generally the most expensive infrastructure projects are those projects which would not have been built in the first place if normal conditions prevail. In case of Delhi CWG , major of the infrastructure spending is done on Airports and Metro overhauling , which in anyways would have been sooner or later. But about Rs 700 crores are still been spent on the projects like over bridges and stadiums (source: www.livemint.com). According to me, these projects are over ambitious with little practical utility. In many of the places a little more planning and common sense ( which is highly uncommon!!) could have reduced spending considerably. The worst thing which we can afford are the white elephants standing after the games were over.

Tourism
Tourism and games go hand in hand. Indian tourism industry is looking towards CWG as a saviour in their efforts to recover from the dreaded recession. In anticipation of huge inflow of foreign tourists, the capacity is being added in form of extra hotels and other accomodation places. Approx 30,000 hotel rooms are added in delhi to cater the visitors ( Source: www.epaper.timesofindia.com) . Although the projections are supporting the work done, there is a catch in it. The seats in the airplanes coming to india are limited. So, the demand will definitely push the ticket price northwards during the games. History depicts that inflow of tourist are maximum shortly before games, reach peak during games, and drops sharply after games. The future of the extra capacity added , will be affected seriously. After the montreal winter olympics , every 3rd hotel which added capacity went bankrupt.

Markets
As some one quoted, "markets are the best snifer dogs". If there is an opportunity,market will definitely sense that. In this light, let us look at the markets reaction when indian won the bid for the commonwealth games. The 2010 CWG are awarded to new delhi on 13 November 2003, and the markets closed 1.68 % lower on 14th november 2003, on next day (Source: www.moneycontrol.com) . Even the construction and infrastructure scrips traded in red. So, it is clearly visible that even markets are not that optimistic of benefits of hosting an event as big as commonwealth games.

Revenue
Beijing olympics , with all its audacity managed to earn only $16 million as margin ( source: www.livemint.com) . Comparitively Los Angels had made $250 millions and Seoul $300 millions. So, the extravagant spending is not resulting in generation of high revenues. The figures of delhi are not yet out , but the projections are not very optimistic.

All said and done, hosting a game is undoubtedly a matter of national prestige and helps a country projecting its image all over the world. This is the best marketing even which a country can do. But in the increasing complexity of games, there should be an intelligent view to all the spending, The day is not far away, when we have special economists would be there knows as "Game Experts"


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