Hosting the Olympics: why are we always getting the cost wrong?

Abstract

Purpose

In the last 50 years, every Olympics has experienced a major cost overrun. This paper explores the reasons for this cost underestimation and looks into the occurrence of the winner's curse. We also forecast the spending pattern of future host cities. Finally, we discuss the role of the International Olympic Committee in making the Olympic Games more efficient and sustainable.

Design/methodology/approach

The review of literature on the topic of constant cost overrun in the Olympic Games is surprisingly very thin. We comprehensively review the existing literature to understand the scholarship in this area. This paper also produces future cost trends for the host cities.

Findings

We argue that cost underestimation is resulting from the outdated bid process which encourages spectacle over efficiency. A no-bid environment is more efficient and allows the host city to negotiate effectively with the International Olympic Committee. The Los Angeles Games of 1984 was profitable and has shown reusing the infrastructure can save a lot of money which could help make the Olympic Games economically sustainable.

Originality/value

This paper adds to the existing knowledge on the cost overrun aspect of Olympics financing. We also forecast the cost trends of hosting future Olympics.

Citation

Khraiche, M. and Alakshendra, A. (2021), "Hosting the Olympics: why are we always getting the cost wrong?", Managerial Finance, Vol. 47 No. 6, pp. 845-855. https://doi.org/10.1108/MF-05-2020-0231