Competing or cooperating to host mega events: A simple model

Using game theory tools, this paper analyzes strategic interactions between two candidate countries in bidding for the hosting rights for a certain mega event. The dynamic modeling reveals that competition may lead to an inefficient Nash-equilibrium, indicating welfare loss for both parties. Using a concrete version of a differential game function, and from the aspect of total benefit maximization that is Pareto-efficient, the paper derives an explicit solution to the game. The model developed has both practical relevance to policy makers and theoretical potential to be applied to other kinds of international biddings.