Mega-events, such as the Olympics, World Cup, and Super Bowl, bring large benefits to the bodies that sanction them but have little effect on the cities that host them. In theory, mega-events bring new economic activity to a region by attracting out-of-towners and their spending. They can also leave a lasting infrastructure or image legacy that can generate economic benefits for years afterward. However, due to substitution effects, crowding out, and leakages, the true economic impact is often lower than predicted.

Host cities must often build expensive new sports facilities and make significant investments in general infrastructure to handle the inflow of tourists. The costs do not stop once construction is completed. Operating costs, especially with respect to security, can seriously escalate costs.

Despite the evidence that mega-events often do not pay, cities line up to host them. In part, this is due to influential special interests who benefit from events at the expense of the general public. In many cases, cities and countries may be bidding for these events for prestige or civic pride rather than purely economic reasons. The winner’s curse and the all-or-nothing demand curve also lead cities to make bids that make little economic sense.