Rule Changes and Competitive Balance in Formula One Motor Racing

Mastromarco, Camilla and Runkel, Marco (June 2004): Rule Changes and Competitive Balance in Formula One Motor Racing. Discussion Papers in Economics 2004-16

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 teams' performances, but also improves competitive balance between the teams. The rule change is implemented, if the FIA's revenue gain from the latter effect overcompensates the FIA's revenue loss from the former effect. We provide empirical evidence from F1 seasons in the period 1950-2003 which supports the main implications of the model.

• Item Type: Paper
• Keywords: Formula One ; Competitive Balance ; Contest
• Faculties: Economics; Economics > Munich Discussion Papers in Economics; Economics > Munich Discussion Papers in Economics > Industrial Organization
• Subjects: 300 Social sciences > 300 Social sciences, sociology and anthropology; 300 Social sciences > 330 Economics
• JEL Classification: D43, L83
• Language: English