Second Place Is First of the Losers

Abstract

This article analyses competitive balance in Formula 1 motor racing 1950-2010. It is shown that regulation change has had a significant positive impact on championship uncertainty but not on race uncertainty or long-term dominance. If television viewer suspense is positively related not only to championship uncertainty but also to absolute quality, then this suggests the purpose of such regulation change is to maximize television broadcasting revenues and gross sponsor exposure. A simple econometric model is employed to analyze competitive balance implications of the Resource Restriction Agreement, designed to restrict team expenditure following the global financial crisis.