The Demand for Sports and Sporting Event.

Sport spectating is in most instances a social activity, providing an opportunity to spend time with others. Indeed, for many people it is the social nature that attracts them to sport viewing. This is known as the group affiliation motive, i.e. a desire to spend time with others, for example friends.

Another, and a related motive, is the family motive which involves a desire to watch sport because it provides an opportunity to spend time with family members (Wann, Melnick, Russel & Pease, 2001). This is based on the fact that humans are social beings, which is reflected in a number of classical theories of human motivation (Alderfer, 1972; Maslow, 1970; Danielson, 1997).

Whether it occurs at the arena or at home, sports tend to be consumed in a group environment. This can fulfil the human need for social interaction by providing a sense of belongingness.
The affective component in attitude theory refers to our emotions about something (Fishbein & Ajzen, 1975; Lutz, 1991).

According to Oliver (2014), affect refers to the feeling side of consciousness that includes pleasure, happiness and liking, to mention some. An emotion can be more than a feeling or a passion, and is more cognitively involved than affect (e.g. Oliver, 2014).

Examples can be the pride local residents enjoy from being awarded the event, but also from the attention the city receives during the host-period. Another example is the happiness and joy an individual feels from the atmosphere in city life during the event period.
It is well known that some sports fans identify strongly with teams/athletes. This can be connected to the self-esteem motive, which concerns an individual’s desire to participate in sports as a fan because it provides an opportunity to feel better about himself or herself.

The individual uses sports fandom to help maintain a positive self-concept. Indeed, fans often increase their association with teams subsequent to successful performances, simply to bask in the team’s accomplishment and boost their own self-esteem (Wann et. al., 2001). When their favourite team or athletes win, they feel like they themselves have won.

The hosting of events often creates expectations of economic benefits within the city or region. As the literature review illustrated, however, it is important to distinguish between the national and regional perspectives. Most of the academic research has concluded that the commercial benefits of the host nation tend to be moderate. Nevertheless, the host city (region) can benefit from investments in sport venues and upgrading of infrastructure, assuming the investments are funded by external sources, as for example the national government. Particularly the hosting of mega events requires substantial investments in sports venues, but also in non-sport facilities. Some cities have infrastructures that enable them to stage major sports events with a very low level of investment, whereas other cities have to invest substantially in infrastructure.
The city will receive worldwide attention during the event period. This can motivate governments to support projects and investments they otherwise would not have supported, hoping it will promote the city and its facilities and products. As an example, many Olympic cities have constructed new airports or upgraded the existing one prior to the games. Very often, these investments are totally or partly funded by the national government. In that way, the events can leave a legacy for the host city. For the host nation, however, the investments represent only an internal redistribution of internal resources. If it was not for the event, the money would have been spent on other projects elsewhere in the nation.
Different practices exist with regards to the funding of such events. In many countries, the national government pays a substantial proportion of the investments in connection to mega events, such as the Olympic Games. North America, and particularly the US, has been an exception in this manner (Solberg & Preuss, 2007). However, any application for both the Olympics and the FIFA World Cup finals has to be complemented by a financial guarantee from the government. Hence, the government will have to bear some risk to have the application accepted.
Many impacts mentioned in this section are known as externalities in the literature. This refers to benefits that affect stakeholders who did not choose to incur them (Buchanan & Stubblebine, 1962). Local residents can enjoy a festival atmosphere in the city life and take pride in a successful hosting. This is comparable to a status of “celebration,” which tends to be stronger with the more people that enjoy it.

Having a party only for some few is of limited value. Another example is the promotion of the city as a tourist destination. Additionally, if the event generates new sports venues, this can motivate more people to exercise and hence improve the health conditions among local residents.

Many of these externalities also have the characteristics of public goods, as they satisfy both the non-rivalling and non-exclusion criterion (Samuelson, 1954).
The stakeholders who are directly involved in hosting of the events will mainly be concerned about the impacts that fall on themselves, and with special attention to the revenues and costs. It is therefore a risk that positive externalities will be neglected.

The consequences can be a suboptimal level of the inputs or outputs that cause the externalities. This, in turn, represents a welfare economic rationale for governmental funding.
However, if the national government funds the event, this creates a principal–agent relation with the government operating as the principal and the stakeholders who benefit being the agents.

Following agency theory, this can motivate the stakeholders to behave opportunistically, which can cause the problem of a “moral hazard.” Those who benefit from the investments will prefer to increase the efforts until their own marginal benefits equal their own marginal costs, not the total marginal costs.

This does not correspond with the objective of the principal, which in this case is the federal government. Therefore, the stakeholders will benefit from lobbying so that the efforts exceed the optimal level.

If they succeed, the result can for example be that the city (or the nation) hosts too many events, or alternatively invests too much in facilities and/or infrastructure. For a more thorough discussion of the phenomenon in general, see, for example, Stiglitz (2000) and Gratton & Taylor (2000) for a sports related discussion.