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Rule Changes and Competitive Balance in Formula One Motor Racing

[journal article]

Mastromarco, Camilla; Runkel, Marco

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Abstract This paper provides an economic explanation of the frequent rule changes in the Formula One (F1) motor racing series. In a two-stage model, the FIA (as the organizer of the F1) first decides whether to change the rules or not, and then the racing teams compete in a contest. It turns out that a rule change reduces the teamsâ ™ performances, but also improves competitive balance between the teams. The rule change is implemented, if the FIAâ ™s revenue gain from the latter effect overcompensates the FIAâ ™s revenue loss from the former effect. We provide empirical evidence from F1 seasons in the period 1950-2005 which supports the main implications of the model.
Document language English
Publication Year 2009
Page/Pages p. 3003-3014
Journal Applied Economics, 41 (2009) 23
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)