To Subsidise or Not to Subsidise : A Game Theory Explanation for the Subsidisation of Sports Events and Facilities

This paper considers the decision of whether or not to subsidise sports events and facilities in light of the recent developments in V8 Super Car racing in New Zealand. Such a decision is never made in complete isolation, because there is usually competition for the right to host events or build facilities to attract events. A simple model is developed, and two two-city scenarios are analysed: one in which the two cities are identical; and the other in which one city is larger than the other. A particularly interesting result is present in the large versus small city scenario, where the smaller city will pay the highest amount for an event when in competition with a large city for hosting an event