30 Nov 2015

Economics of cheating in athletics

Paul writes*

Cynical observers were quick to dismiss the latest revelations in athletics’ doping scandal. It was just another episode in the history of a field of sports riddled by cheating. However, athletics fans were shocked nonetheless when the World Anti-Doping Agency (WADA) dropped a bombshell [pdf] on the sport on November 9th. The report confirmed what the German channel ARD had reported as early as last December. However, it went beyond that by unveiling state-organized scheme last seen when Russia’s athletes were competing with a hammer and sickle on their chest. Even Russian WADA officials and individuals in the IAAF leadership have been implicated. As the allegations against Liliya Shobukhova - a marathon runner - show, professional athletics is a money-game in which stringent rules and the enforcement thereof are essential (as I will explain below). The athlete reportedly paid €450,000 to Russia’s national athletics organization to destroy positive test results. This particular allegation shows that in highly individualized and competitive sports the earnings from sponsors or prize money are extremely unevenly distributed. Many nationally successful athletes even in wealthy countries such as the Netherlands, Germany or Britain cannot live off of their professional career and work or study on the side. Meanwhile, the most successful runners receive over €100,000 merely for showing up to certain events. This increases the incentive to use doping as a method to get ahead. Where seconds or even split-seconds decide the difference between a six-figure pay-off and no pay-off athletes will consider every option to improve.

The recent Russian doping scandal reminded me of a simple concept in microeconomics: the Prisoner’s Dilemma. If you need a quick refresher Wikipedia explains the game quite well. Versions of the prisoner’s dilemma can help us explain why sports such as athletics are prone to individual or even state-organized doping.

Let’s first presume there would be no WADA and no rules against doping. The following scheme may illustrate the dynamic of two athletes with similar talent:

Now as we can see the logical outcome of this very simplified example is that both athletes cheat. If they don’t the other one will because of the high payoff of finishing among the first which in turn secures sponsorships, invitational races and so on. However, to avoid this from happening, the International Olympic Committee established rules against cheating and put schemes into place to enforce them. This is the tricky part. The WADA delegates this enforcement to national and regional subsidiaries within the countries. To some degree the rigor with which cheaters are pursued depends on national ability or willingness to do so.

In a perfect world where cheaters are caught and competition is decided by performance we would have the following matrix:

As the example of Russia’s scandal shows, a dishonest athletics organization can skew the results in favor of its own athletes. All of a sudden Athlete A does not play by the same rules any more as does Athlete B. As country A does not enforce its anti-doping rules but country B does so perfectly, we end up with a matrix that looks something like this:

As every cheater in country B is caught (a very optimistic assumption) athlete B has no reason to cheat. If he does he will be suspended from competitions and might lose sponsorships. However, athlete A has huge incentive to cheat as he is much more likely to win if his opponents do not cheat. Even if they do, their getting caught will make sure that athlete A takes home the prize.

As the reality is much closer to the third table (with some or many cheating) than to the second table (no cheating) some have called for allowing doping for all to end up with table 1. Can you think of economic reasons not to do so?

Bottom line: where doping controls are delegated to the national level dishonest countries have an incentive to cheat as they will perform better than those who enforce doping tests vigorously. Our game theory example suggests to enforce the rules on all equally or to do away with rules in general. Only then would we be certain that sports are fair. Or would we…?

* Please comment on these posts from my microeconomics students, to help them with unclear analysis, other perspectives, data sources, etc.

1 comment:

Wietse said...

You asked an interesting question in this post: Should we allow doping to everyone, to make things fair again? It's an interesting argument, and there is some logic to it: It could take care of the bootleggers and baptists problem. There are some disadvantages though: There is a significant chance of a race to the bottom. People will be willing to destroy their body more and more for a bit of short term improvement to compete with others who are doing the same.
If we put this in economic terms, the price (the sponsorships and price money) but the costs (on the body of the athlete) will be raised and raised until there is absolutely no profit anymore. Such a situation where there is no profit may not be bad in a purely economic sense, but because the costs are not (at least not entirely) fininacial but also on humans, it doesn't seem ethical to me.

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