Negotiating Games: Cities, Sports, and the Winner’s Curse

Abstract

Requests for subsidies from North American cities for the sports facilities used by professional teams continues. While teams elsewhere are expected to use their own revenues and income from lotteries or gaming for their facilities, demands for subsidies are heard. In addition, bids to host national and international competitions are also expected to include public subsidies. This article explores the bargaining games between communities and teams. Its goal is to understand if any city can escape from negotiations and avoid the winner’s curse by reducing or eliminating the need to offer a subsidy. A framework is developed that a larger community can utilize to minimize subsidies. If larger cities correctly understand the dynamic relationship of capital to their internal and external environments, they may well take the initial steps toward deescalating the competition that creates a winner’s curse for the public sector and protect the interests of both small and large cities.