THE Economics of Match-Fixing

Caruso, Raul (2007): THE Economics of Match-Fixing.

Abstract

The phenomenon of match-fixing does constitute a constant element of sport contests. This paper presents a simple formal model in order to explain it. The intuition behind is that an asymmetry in the evaluation of the stake is the key factor leading to match-fixing. In sum, this paper considers a partial equilibrium model of contest where two asymmetric, rational and risk-neutral opponents evaluate differently a contested stake. Differently from common contest models, agents have the option of choosing a second instrument to affect the outcome of the contest. The second instrument is assumed to capture positive investments in ‘contest management’ – namely efforts paving the way for a match-fixing. In particular, it will be demonstrated that, under some conditions, an asymmetry in the evaluation of the stake can lead to a concession from one agent to the other and then to a match-fixing. Eventually the intuitions and results of the model will be applied to make a comparison between the FIFA World Cup and the UEFA Champions League tournaments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Contest; Football; Sport Contest; Contest Management; Match-Fixing; Asymmetry in evaluation; Concession; FIFA; UEFA; CHampions League; World Cup
• Subjects: L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption

References

Amegashie A.J., (2006), A contest Success Function with a Tractable Noise Parameter, Public Choice, vol. 126, pp.135-144. Baik K.H., (1998), Difference-form contest success functions and efforts levels in contests, European Journal of Political Economy, vol. 14, pp. 685-701. Baik K.H., Shogran J.F., (1995), Contests with Spying, European Journal of Political Economy, vol. 11, pp. 441-451. Blavatskyy p., (2004), Contest Success Function with the possibility of a draw: axiomatization, Institute for Empirical Research in Economics, University of Zurich, working paper n. 208. Caruso R. (2007a), Conflict and Conflict Management with Asymmetric Stakes, (The Good-Cop and the Bad- Cop part II), paper presented at the AEA/ASSA conference 5-7, January 2007, Chicago. Caruso R. (2007b), Reciprocity in the Shadow of Threat, paper presented at the Conference ‘Reciprocity: Theories and Facts’, 22-24 February, Verbania. Caruso R. (2006a), Conflict and Conflict Management with Interdependent Instruments and Asymmetric Stakes, (The Good Cop and the Bad Cop Game), Peace Economics, Peace Science and Public Policy, vol. 12, no.1, art.1. Caruso R. (2006b), A Trade Institution as a Peaceful Institution? A Contribution to Integrative Theory, Conflict Management and Peace Science, vol. 23, no.1, pp. 53-72. Caruso R. (2005), Asimmetrie negli Incentivi, Equilibrio Competitivo e Impegno Agonistico: distorsioni in presenza di doping e combine, Rivista di Diritto ed Economia dello Sport, vol. 1, n. 3, pp. 13-38. Clark D.J., Riis C. (1998),Contest Success Functions: an extension, Economic Theory, vol. 11, pp. 201-204. Dixit A., (2004), Lawlessness and Economics, Alternative Modes of Governance, Princeton, Princeton University Press. Dixit A., (1987), Strategic Behavior in Contests, The American Economic Review, vol. 77, no.5, pp. 891-898. Duggan M., Levitt S.D., (2002), Winning isn’t Everything: Corruption in Sumo Wrestling, American Economic Review, vol. 92, n.5, pp. 1594-1605. Epstein G. S., Hefeker, C., (2003), Lobbying Contests with alternative Instruments, Economics of Governance, vol. 4, pp. 81-89. Fehr E., Gachter S., (2000), Fairness and Retaliation: The Economics of Reciprocity, The Journal of Economic Perspectives, vol. 14, no.3, pp. 159-181. Gintis H., (2000), Game Theory Evolving, Princeton University Press, Princeton. Harsanyi J.C., (1965), Bargaining and Conflict Situations in the Light of a new approach to Game Theory, The American Economic Review, vol. 55, no. 1/2, pp.447-457. Hillman A.L., Riley J.G., (1989), Politically Contestable Rents and Transfers, Economics and Politics, vol. 1, no.1, pp.17-39. Hirshleifer J., (1989), Conflict and Rent-Seeking Success Functions, Ratio vs. Difference Models of Relative Success, Public Choice, no. 63, pp.101-112. Isard W., Smith C., (1982), Conflict Analysis and Practical Management Procedures, An introduction to Peace Science, Cambridge, Ballinger Publishing Company. Konrad K., (2000), Sabotage in Rent-Seeking, Journal of Law, Economics and Organization, vol. 16, no.1, pp. 155-165. Konrad K., Skaperdas S., (1997), Credible Threats in extortion, Journal of Economic Behavior & Organization, vol. 33, pp.23-39 Moldovanu, B. and Sela, A., (2001), The optimal Allocation of Prizes in Contests, American Economic Review, vol.91, no.3, pp. 542–558. Nash J., (1953), Two-Person Cooperative Games, Econometrica, vol. 21, no.1, pp.128-140. W. C. Neale, The Peculiar Economics of Professional Sports, A contribution to the theory of the firm in sporting competition and in market competition, Quarterly Journal of Economics, vol. 78, n. 1, 1964, 1-14. Nti K. O., (1999), Rent-Seeking with asymmetric valuations, Public Choice, vol. 98, pp. 415-430. Nti K.O., (2004), Maximum Efforts in contests with asymmetric valuations, European Journal of Political Economy, vol. 20, pp. 1059-1066. O’Keeffe M., Viscusi K. W., Zeckhauser R. J. (1984), Economic Contests: Comparative Reward Schemes, Journal of Labor Economics, vol.2, no.1, pp.27-56. Preston I., Szymanski S. (2003), Cheating in Contests, Oxford Review of Economic Policy, vol. 19, no.4, pp. 612-624. Rosen S., (1986), Prizes and Incentives in Elimination Tournaments, The American Economic Review, vol. 76, no.4, pp. 701-715. Szymanski, S., (2003a), The Economic Design of Sporting Contests, Journal of Economic Literature, XLI, December, 1135–1185. Szymanski, S., (2003b), The Assessment: The Economics of Sport, Oxford Review of Economic Policy, vol. 19, no.4, pp. 467-477 Szymanski S., (2000), A Market Discrimination in the English Professional Leagues, Journal of Political Economy, vol. 108, n. 3, 2000, 590-603; Szymanski S., (2003), The Economic Design of sporting Contests, Journal of Economic Literature, vol. 41, pp. 1137-1187. Szymanski S., Valletti T.M., (2005), Incentive Effects of Second Prizes, European Journal of Political Economy, vol. 21, pp. 467-481. Torgler B., (2006), Historical Excellence in Soccer World Cup Tournaments: Empirical Evidence with Data from 1930 to 2002, Rivista di Diritto ed Economia dello Sport, vol. 2, no.1, pp. 101-117 Tullock G., (1980), Efficient Rent Seeking, in Buchanan, J. M., Tollison R., D., Tullock G., (eds.), Toward a Theory of the Rent-seeking Society, Texas A&M University, College Station, pp. 97-112.