19.12.2018 – It is frequently assumed that sports competitions must be balanced to maximize the fans’ interest (and consequently demand). This assumption is known as the Uncertainty-of-Outcome Hypothesis (UOH) in the sports economics literature (Rottenberg, 1954, Neale, 1964).
Despite its theoretical relevance and prominence as justification for interventions aiming to maintain or improve the level of competitive balance within leagues, decades of empirical research have struggled to provide clear evidence on its relevance. Reconsidering the empirical evidence, however, an interesting pattern is revealed. Most of the literature suggesting that fans have a preference for tighter games tested the UOH in North American Major League sports - such as the North American Basketball Association (NBA) or Major League Baseball (MLB) - while the majority of previous studies on European sports, that is, predominantly European football [soccer], detected that the fans have a preference for games involving a favourite.
The causes of such cross-continental differences with regard to the relevance of the UOH have remained to be completely unclear so far. In general, such differences might be attributed to cross-cultural variations with regard to decision-making under uncertainty, the type of sports consumed, and/or the mode of consumption, that is, the manner in which a sport event is consumed.
In a new study Georgios Nalbantis and Tim Pawlowski try to disentangle the aforementioned channels. They test the UOH with survey data from football fans in the US. The results of their demand models suggest that for professional football (soccer), Americans' preference for game uncertainty – similar to Europeans (see Pawlowski, Nalbantis & Coates, 2018) - is dominated by other preferences such as loss aversion. These results suggest that the cross-continental differences may be attributed to the type of sports and the mode of consumption rather than cross-cultural variations in (consumer) decision-making.
The paper is part of a recent research project on internationalization in professional football by Georgios Nalbantis and Tim Pawlowski (book) and has now been accepted for publication in the Journal of Sports Economics. The project benefited from a João Havelange Research Scholarship issued by the Fédération Internationale de Football Association (FIFA) and the Centre International d’Étude du Sport (CIES).
Nalbantis, G. & Pawlowski, T. (2018). U.S. demand for European soccer telecasts: A between-country test of the uncertainty of outcome hypothesis. Journal of Sports Economics, DOI: 10.1177/1527002518817598.