Sports viewing behaviour with loss aversion and competition balance

ABSTRACT

We develop a model based on sports viewer with either uncertainty of outcome hypothesis (UOH) or loss aversion and investigate the level of loss aversion on the effect of league competition balance and team profit. We obtained the following two major results. Firstly, we showed that cases, where the spectators have loss aversion, have better league competition balance than cases when UOH applies. Moreover, we clarified that cases, where the preference for winning is different between the teams, have a poorer league competition balance. Secondly, it became clear that there is greater profit for both teams in cases where the spectators have loss aversion compared to cases where UOH is applied. Moreover, we showed that in cases where spectators have loss aversion, teams with a relatively strong preference for winning have greater profits, but for spectators where UOH is applied, teams with a relatively weaker preference for winning obtain greater profit.

KEYWORDS:

• Spectator behaviour
• loss aversion
• competition balance
• uncertainty of outcome hypothesis

JEL CLASSIFICATION:

• D11
• D10

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ We simulate under ${\gamma }_1=0.6,{\gamma }_2=0.4,U^W=0.7,U^L=0.2,c=0.3$ for cases where the preference for winning was similar between teams, while under ${\gamma }_1=0.8,{\gamma }_2=0.2,U^W=0.7,U^L=0.2,c=0.3$ for cases where the preference for winning was different between teams.

Additional information

Funding

This work was supported by the Grants-in-Aid for Scientific Research [JP19K11442].