Regression to the tail: Why the Olympics blow up

Bent Flyvbjerg, Alexander Budzier and Daniel Lunn

Environment and Planning A, 2021, vol. 53, issue 2, 233-260

Abstract: The Olympic Games are the largest, highest-profile, and most expensive megaevent hosted by cities and nations. Average sports-related costs of hosting are $12.0 billion. Non-sports-related costs are typically several times that. Every Olympics since 1960 has run over budget, at an average of 172 percent in real terms, the highest overrun on record for any type of megaproject. The paper tests theoretical statistical distributions against empirical data for the costs of the Games, in order to explain the cost risks faced by host cities and nations. It is documented, for the first time, that cost and cost overrun for the Games follow a power-law distribution. Olympic costs are subject to infinite mean and variance, with dire consequences for predictability and planning. We name this phenomenon "regression to the tail": it is only a matter of time until a new extreme event occurs, with an overrun larger than the largest so far, and thus more disruptive and less plannable. The generative mechanism for the Olympic power law is identified as strong convexity prompted by six causal drivers: irreversibility, fixed deadlines, the Blank Check Syndrome, tight coupling, long planning horizons, and an Eternal Beginner Syndrome. The power law explains why the Games are so difficult to plan and manage successfully, and why cities and nations should think twice before hosting. Based on the power law, two heuristics are identified for better decision making on hosting. Finally, the paper develops measures for good practice in planning and managing the Games, including how to mitigate the extreme risks of the Olympic power law.

Keywords: Olympic Games; cost; cost overrun; power laws; regression to the tail; financial risk; fragility; convexity; irreversibility; misaligned incentives; tight coupling; Eternal Beginner Syndrome; fat tails; skin-in-the-game; megaevent; megaproject (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0308518X20958724 (text/html)

Related works:
Working Paper: Regression to the Tail: Why the Olympics Blow Up (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:envira:v:53:y:2021:i:2:p:233-260

DOI: 10.1177/0308518X20958724

Access Statistics for this article

More articles in Environment and Planning A
Bibliographic data for series maintained by SAGE Publications ().