Volume 33, Number 1, September 2015
Answers
Professional team sport: an
economist’s view
Jon Guest
This resource provides answers to the ‘Questions and activities’ set in Andrew Cooke’s article
on the economics of professional team sport in the September 2015 issue of ECONOMIC REVIEW
(pp. 2–5).
Explain what is meant by ‘uncertainty of outcome’
and ‘competitive balance’.
In the article the term uncertainty of outcome is used to discuss the predictability of an individual
game. How likely is it that the home team will win? How likely is it that the away team will win, or that it
will be a draw? If it is very likely that one team will win then the game is predictable — in other words
the uncertainty of outcome is relatively low. It been argued by some economists that fans prefer to
watch a game that is unpredictable, i.e. where the uncertainty of outcome is relatively high. You could
find out the unpredictability of a particular game during the football season by looking at the fixed odds
offered by bookmakers.
The term competitive balance is used in the article to describe the length of time a competition
remains competitive. For example, are a large number of teams in contention to win the English
Premier League? Are only a few teams in contention to win the league from a relatively early point in
the season? How many teams can still win the league with just a few games to go? If only a limited
number of teams have a realistic chance of winning the league from a relatively early point in the
season, then the competition is said to be competitively imbalanced. This is more likely to happen if a
few clubs earn a lot more revenue than the other teams. They can then buy and pay the wages of all
the most talented players. If this happens then fans may lose interest.
How does uncertainty of outcome affect the
popularity of the FA Cup?
Most fans seem to enjoy cup upsets and this maintains their interest in the competition. If the teams
from the higher divisions routinely beat the teams from the lower divisions, then the games become
predictable and fans will lose interest in the cup competition. The uncertainty of outcome will be low
and so it is argued that both attendances and revenues will fall. An interesting article (see Frontier
Economics, May 2015) recently published data on the number of cup upsets from 1999 to 2015.
Premier League teams lost 19% of their home games and 30% of their away games against League
One opposition. The number of cup upsets over the period seems to have remained reasonably
constant. However, research published by an economist back in 2001 using data over a much longer
Philip Allan Publishers © 2015
www.hoddereducation.co.uk/economicreview
time period found that cup upsets had become less likely and this was having a negative impact on
fans’ interest in the competition and the attendance at games (see The eclipse of the FA Cup on the
Royal Economic Society website).
Sketch a diagram to show why top footballers earn
more than firefighters.
Go to the video clip resource to see a diagram and hear a discussion of this question.
This resource is part of ECONOMIC REVIEW, a magazine written for A-level students by subject experts.
To subscribe to the full magazine go to www.hoddereducation.co.uk/economicreview
Philip Allan Publishers © 2015
www.hoddereducation.co.uk/economicreview