The Color of Medals

Abstract

This article explores a country’s utility maximization behavior for the Olympic Games when uncertainty exists in medal production. An application of the theoretical model developed shows that, when the Eastern bloc pays relatively lower (higher) costs to win medals, as the overall welfare level increases, the related risk premium decreases, which, in turn, increases (decreases) the differences between the Eastern and Western bloc countries’ performances in the Olympic Games. When the Eastern bloc pays relatively lower (higher) costs to win medals, the difference in the performance is also supposed to increase (decrease), as the uncertainty in obtaining medals decreases and the cost of medal production in the Western bloc increases. As a result, this study predicts that the out-performance of the former socialist countries in the Olympic Games would have dissipated, even without the recent political and economic collapse of those countries, unless they had accelerated their distorted sport policies.