The Utility of Sport and Returns to Ownership

Abstract

Previous research demonstrates conclusively that owning thoroughbred racehorses tends to be a losing financial proposition. Owners pay a premium to enter the game of racing. Recent evidence has concluded that this premium is approximately constant across thoroughbred prices. This article generalizes recent work by allowing multiple determinants of the premium rather than one. It concludes that although the premium is approximately constant for relatively low-priced horses, it increases with the cost of the animal, at least for the most expensive ones. Evidently, a sizable number of owners are willing to pay increasing prices for talent in the quest to own a champion. To the extent this preference for champions generalizes to other sports, it has important implications for public policy and social welfare.