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Uncertainty of Outcome Hypothesis: Theoretical Development and Empirical Evaluation

Author

Listed:
  • Hayley Jang

    (Sangi University)

  • Doyoung Kim

    (Sogang University)

  • Young Hoon Lee

    (Sogang University)

Abstract

This paper studies the effect of outcome uncertainty (OU) on fan attendance in sports. First, it develops a theoretical model of fan attendance in which fans derive utilities from match quality and team quality. The theoretical results suggest that empirical models should control for the effect of team quality (“standard model”) to identify the effect of OU or include a cubic term of win probability (“alternative model”). Second, the paper evaluates previous empirical studies. It finds that they adopted the standard model, but often failed to control for the effect of team quality. Third, the paper applies the two empirical models to samples that are drawn from the English Premier League and from Major League Baseball. The empirical results from the standard model are sensitive to model specifications, whereas those from the alternative model are consistent across different specifications.

Suggested Citation

  • Hayley Jang & Doyoung Kim & Young Hoon Lee, 2023. "Uncertainty of Outcome Hypothesis: Theoretical Development and Empirical Evaluation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(3), pages 271-291, May.
    • Handle: RePEc:kap:revind:v:62:y:2023:i:3:d:10.1007_s11151-023-09899-w
    DOI: 10.1007/s11151-023-09899-w
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    More about this item

    Keywords

    Sports economics; Uncertainty of outcome hypothesis; Fan attendance; Competitive balance;
    All these keywords.

    JEL classification:

    • L80 - Industrial Organization - - Industry Studies: Services - - - General
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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