Melbourne Accounting Research Seminar - Pat Ferguson

Mr Pat Ferguson from Harvard Business School will present a MARS seminar.

Topic: Consuming Contests: Outcome Uncertainty, Information Disclosure, and Spectator Demand

Abstract: Do individuals prefer to consume contests with more uncertain outcomes? To justify the implementation of competitive balance policies (e.g. handicapping, revenue sharing, etc), contest designers frequently makes this very argument. However, scholars have only found mixed empirical support for this contention. To address this debate, we look to professional sports and exploit the announcement of injuryinduced changes to teams' line ups - a type of mandatory disclosure - to estimate the eect of outcome uncertainty on spectator demand for contests. Drawing on multiple seasons of game-level data from the Australian Football League, we and large eects of game outcome uncertainty on demand for live sports: a one-standard deviation increase in the outcome uncertainty of a game causes, on average, a 10.6% increase in game-day attendance. We also estimate the level of outcome uncertainty that maximizes game-day attendance and  nd that demand for live sport is greatest when the home team has a win probability of approximately 54%. Together, these results suggest that spectators have much stronger preferences for close and uncertain contests than has been previously documented in the literature.