The Economics of Corruption in Sports: The Special Case of Doping

by Eugen Dimant and Christian Deutscher

Corruption in general, and its subset doping in particular, are ubiquitous in both amateur and professional sports and have taken the character of a systemic threat.1
In creating unfair advantages, doping distorts the level playing field in sporting competition. With higher stakes involved, such distortions create negative externalities not only on the individual level (lasting health damages, for example) but also frictions on the aggregate level (such as loss of media interest) and erode the principle of sports.

It is hardly surprising that corruption is a persistent feature in sports, particularly professional sports. Common examples include fixing matches, bribing officials, using performance-enhancing substances, or various strategies for gaming an outcome.2 Indeed, professional sports attract not only a lot of interest (estimates range from 800 million to 1.2 billion active sportspersons worldwide), but also huge amounts of money, and thus corruption in sports can create tremendous societal and economic burdens. The economic impact of sports is enormous. Bures argues that “an estimated EUR 2.5 billion were spent on advertising in connection with the 2006 FIFA World cup. The sports industry at large generates on average between 2.5 and 3.5 of the GDP of countries.”3 An athlete’s incentives to win are shaped not only by the (expected) inflow of prize money but also by the ascending prestige that is intertwined with one’s pursuit of self-fulfillment. Such incentives can cause athletes to cross legal boundaries in order to create a cutting edge.

In our recently-published working paper,4 we shed light on a particular case of corruption in sports: doping. We argue that the mechanism of doping entails all the ingredients to distort fair competition and trust in a game, and consequently corrupts the entire sports system. Our aim is to bring together economic theories from both the rational and behavioral spheres to analyze the athlete’s inclination towards doping. The implications suggest that both approaches are useful in explaining doping decisions and that athletes are driven by complex bundles of cost-benefit calculations, incentives, reputation concerns, spill-over effects, and social contagion, etc. By shedding light on the mechanism of doping from an interdisciplinary perspective, we conclude that the fight against doping can only succeed with strong regulatory bodies in place. It is these institutions’ responsibility to facilitate fair competition and yield a level playing field for athletes. Research indicates that both on the individual and aggregate level no one benefits from infested disciplines in the long run. In our paper, we discuss possible countermeasures that have the potential to reduce the incentives for doping from both the individual and institutional perspective.

Existing research is still relatively thin on many issues with respect to sport’s problem with corruption in general and doping in particular. Consequently, the institutions in charge have trouble implementing the right mix of rules and leeway to allow for clean and competitive sports. One fundamental problem is the lack of good data. Given the excessively high monetary and non-monetary stakes involved in (professional) sports, this deficiency is worrisome. Official bodies and institutions should ensure that the integrity of a sport is taken as seriously and as professionally as athletes take their training.

Detrimental Effects of Doping

Individual Perspective

Many sports have heavily suffered from doping, leading to a decline in interest from spectators at large.5 According to Preston and Szymanski,6 there are four basic reasons why doping can be harmful to sports in general and athletes in particular:

1. It damages the health of athletes.
2. It gives doped athletes an unfair advantage.
3. It undermines interest in the sport.
4. It undermines the reputation of a sport.

An increased awareness raised by multiple doping related deaths in the 1960s led to a ban in 1967 on using stimulants and narcotics in competitions. Since then, the number of banned substances and practices has been growing steadily, and eventually gave rise to an official characterization of doping and a list of substances banned by the World Anti-Doping Agency (WADA) in 2004.

Aggregate Perspective

Doping not only harms individuals but also negatively impacts the integrity of the sport and the larger society. Athletes generally act as role models and thus bear some responsibility to society. Being exposed for using PEDs (Performance Enhancing Drugs) not only smears the athlete’s reputation and calls into question the legitimacy of their achievements, but also taints the sport’s clean slate. Once an athlete’s reputation is smeared, the loss of trust might translate into the fan’s distrust in institutions and weakening the effectiveness and trustworthiness of those institutions. What is more, performing doping tests entails enormous annual costs to society. Referring to official information from the World Anti-Doping Agency, Maennig7 estimates the costs in 2013 to range between $229 million and$500 million in order to cover 270,000 doping tests. In addition, the repetitive occurrence of doping has the power to cause a sport to lose its credibility. The best-known case is professional cycling.

The Decision to Dope: Explaining Behavior

Individual Perspective: A Rational Approach

Monetary and non-monetary incentives play a decisive role in an athlete’s calculus. Approaching this topic from a rational perspective, Becker and Murphy8 argue that even strong addictions are driven by rational decisions and involve a forward-looking maximization of stable preferences. Individuals with high discount rates for future events and thus a high preference for the present are more likely to become addicted. Using a similar approach, Maennig9 explicitly models the individual’s decision to engage in crime in a rational risk-assessment style. He argues that athletes are able to carry out proper risk assessments in order to weigh their expected benefits against the expected costs. From an athlete’s point of view the decision of whether or not to dope is similar to a prisoner’s dilemma. Both athletes would be better off not engaging in doping in the first place. But as nobody can trust the other, both end up taking drugs in order to enhance their chances to win.

We argue that the incentive’s strength in manipulating an athlete’s decision about whether or not to take performance-enhancing drugs is a function of his own age and likely exhibits a U-shape characteristic. The reasoning goes as follows: a competitive athlete in his young years has both the physical conditions and sufficient upward leeway to allow for a skill boost large enough to create an edge that makes the difference between mediocrity and superstardom. Under these circumstances, the expected monetary and non-monetary benefits might very well outweigh the risks accompanied by taking PEDs. While this advantage vanishes with the athlete getting older, this flattening off is substituted and the initial decline is likely to be overcompensated for by what is known as the “endgame effect” at the end of his active career. Here, existing punishment mechanisms, such as exclusion from participation in tournaments, have no credible sanctioning effect on an old athlete who is close to his retirement.

The athlete’s opportunity costs of not being able to earn (prize) money, his increasing loss of value as he advances in age, and being exposed to a prisoner’s type of dilemma work in the same direction and serve as incentives to take performance enhancing drugs. As the evidence suggests, the combination of these incentives is strong enough to outweigh the threat of punishment.

Aggregate Perspective: Spill-Over Effects, Social Contagion and Reputation

Research indicates that crime has severe contagion effects. Along these lines, individuals are more inclined towards deviant behavior if people around them behave in an unethical way.10 Linked to this is the threat of reputation loss. In a social context, reputation determines one’s own trustworthiness, and once that is undermined it is hard to rehabilitate into society. However, an individual’s reputation depends not only on one’s own behavior but also on the behavior of peers and the group dynamics. In this context, Tirole studies the impact of the joint dynamics of individual and collective reputations on the persistence of corruption. The assumption is that individual incentives are affected by the individual’s past behavior (which is commonly observed by outsiders in a noisy manner) and the group’s past behavior, thus introducing reputation effects. If this is the case, we can model the intergenerational dependency of past members’ behavior and possible reputation loss on current members’ decisions.11

Countermeasures and Final Remarks

The comprehensive mitigation of illegal doping requires a multifaceted approach. From a classical cost-benefit perspective, raising the (expected) costs for doping might do the trick, which in return can be expected to (ceteris paribus) reduce the incentives for such deviant behavior in the first place. This can be implemented via both pecuniary penalties, in the form of fees and an extended ban from the federation or from any form of competition events, on corrupt athletes. The possible loss of reputation represents a strong cost-driving factor. If the media sticks together and provides extensive media coverage, the concomitant costs would rise significantly.

One feasible approach is to extend the (randomized) testing of professional athletes for PEDs. Another potential approach would aim at reducing expected benefits. This could be achieved by, for example, lowering the prize money for the athletes or reducing the athlete’s base income. On the other hand, reducing benefits could potentially harm the whole industry as the people’s excitement about and involvement in sports might drop off significantly. Along these lines, adjusting the disparity in the athletes’ incomes represents another regulatory possibility. Further attempts to fight the doping issue involve harsher measures, such as temporarily excluding the tainted sports disciplines from the Olympic program, banning the television broadcast of such sports, or shifting the cost burden to official institutions of the respective sports.12

However, the effectiveness of countermeasures to fight corruption in sports in general and rampant doping in particular is mediated by the corruption inherent in the institutions themselves. One striking example is the International Federation of Association Football (FIFA). For decades, FIFA has been involved in corruption scandals on and off, with respect to vote buying, awarding of contracts, and the World Cup bids. Representing the main governing body of international soccer, one would expect such an institution to take the clearing up of corruption more seriously than has been the case so far. In fact, FIFA’s Investigatory Chamber of the FIFA Ethics Committee (FEC) seems to be negligent in shedding light on existing deficiencies, and instead defers publication of the final report dealing with the investigation of the latest corruption issues related to the allegedly corrupt World Cup bids of 2018 (Russia) and 2022 (Qatar).13 Under such circumstances, institutions fail to fulfill their duties and in turn contribute to breeding systemic corruption. With high stakes on the line, such an economy of influence is serving the interests of a few at the expense of the many. Unsurprisingly, the fight against corruption of any kind in sports cannot be successful as long as the underlying institutions suffer from the same disease. More steps have to be undertaken to ensure clean sports and fair competition, such as creating truly independent governing institutions that are prevented from pursuing their own interests or those of a minority of stakeholders.

1. Eugen Dimant, “The Antecedents and Effects of Corruption – A Reassessment of Current (Empirical) Findings,” MPRA Paper, No. 60947, December 2014.

2. For a more pronounced enumeration of how corruption is expressed in the sports context, see Wolfgang Maennig, “Corruption in International Sports and How it May Be Combatted,” International Association of Sports Economists Working Papers, No. 08-13, August 2008.

3. Radim Bures, “Why Sport Is Not Immune to Corruption,” Transparency International Czech Republic Working Paper, December 2008.

4. Eugen Dimant and Christian Deutscher, “The Economics of Corruption in Sport: The Special Case of Doping,” Edmond J. Safra Research Lab Working Papers, No. 55, January 20, 2015, http://ssrn.com/abstract=2546029.

5. Wolfgang Maennig, “Inefficiency of the Anti-Doping System: Cost Reduction Proposals,” Substance Use & Misuse 49.9 (2014): 1201-1205.

6. Ian Preston and Stefan Szymanski, “Cheating in Contests,” Oxford Review of Economic Policy 19.4 (2003): 612-624.

7. Maennig, “Inefficiency of the Anti-Doping System.”

8. Gary S. Becker and Kevin M. Murphy, “A Theory of Rational Addiction,” Journal of Political Economy 96.4 (1988): 675-700.

9. Maennig, “Corruption in International Sports and How It May Be Combatted.”

10. Edward L. Glaeser, Bruce Sacerdote and José A. Scheinkman, “Crime and Social Interactions,” Quarterly Journal of Economics 111.2 (1996): 507-548.

11. Jean Tirole, “A Theory of Collective Reputations (With Applications to the Persistence of Corruption and to Firm Quality),” Review of Economic Studies 63.1 (1996): 1-22.

12. Maennig, “Inefficiency of the Anti-Doping System.”

13. See Ben Rumbsby, “Pressure Grows on FIFA to Publicise its Report into Possible World Cup Bid Corruption,“ Telegraph, September 24, 2014, http://www.telegraph.co.uk/sport/football/world-cup/11118834/Pressure-grows-on-Fifa-to-publicise-its-report-into-possible-World-Cup-bid-corruption.html.