Why Countries Overpay for the World Cup: A Political Economy of Mega-Event Bidding

With the 2026 World Cup approaching, it is worth reconsidering what it truly means for a country to host one of the world’s largest sporting events. Hosting the World Cup is often framed as an economic opportunity, promising surges in tourism, job creation, and global visibility. And with good reason: the event is the world’s most watched sporting tournament and is held only once every four years. The host country is thus thrust into the spotlight as preparations begin, and tasked with the enormous responsibility of delivering the infrastructure, logistics, and security capacity the tournament demands—often with substantial public spending upfront. The fiscal burden can be substantial. Historically, host countries have spent billions preparing for the tournament, and the evidence suggests costs often exceed short-term, quantifiable benefits.

Qatar, for example, spent over $200 billion preparing for the 2022 World Cup, while IMF estimates put short-run gains from visitor spending and World Cup–related broadcasting revenue at around a mere $2.3–$4.1 billion.  For Brazil, in the years leading up to the 2014 World Cup, mass protests spread across major cities. Demonstrators linked World Cup expenditures to deteriorating public services and rising living costs. In South Africa, after the 2010 cup, the new stadiums built quickly became costly to maintain and significantly strained public budgets. The puzzle, then, is not merely that hosting frequently fails to deliver its promised economic benefits, but that countries—particularly developing ones with limited resources—continue to bid aggressively for the right to host these events, despite mounting evidence of negative returns.

In fact, World Cup bidding might not be  an economic investment decision at all, but a political  one informed  by three mechanisms: the winner’s curse inherent in competitive bidding, systematic optimism bias embedded in government forecasts, and political incentives that reward leaders for symbolic prestige even as long-term costs fall on taxpayers. By integrating auction theory, behavioral economics, and political incentives into a unified framework, this analysis explains why overbidding persists—and why the consequences are disproportionately severe in developing countries. 

To become a World Cup host, countries must prevail in a competitive bidding process in which they submit detailed proposals outlining their plans for infrastructure, venues, security, and event operations. These bids are formally evaluated and voted on by FIFA’s Congress, which assesses proposals based on criteria such as stadium readiness, transportation capacity, services, safety, and overall risk. In practice, however, the bidding process has not always adhered strictly to these formal criteria. There have been multiple scandals involving the World Cup bidding process, most notably in the cases of Russia and Qatar, where FIFA committee members were indicted for fraud after accepting bribes in exchange for their votes. Countries spend enormous sums of money to win these bids, yet—given the evidence above—the scale of this spending often appears difficult to justify based on the economic returns from hosting alone. This raises a central question: why do countries continue to spend so much to secure hosting rights?

One explanation lies in the concept of the winner’s curse, popularized by economist Richard Thaler, which describes how winners in competitive auctions tend to systematically overpay. Thaler describes how this decision making in an auction setting—one that is high-pressure, intense, and overwhelming—can often be irrational. In an auction, people are bidding on an item that already has value assigned to it. As people bid, they recognize that people are paying more to obtain that item—so perhaps the item's value is worth more than they had initially evaluated. So people start to bid higher. The winner—the person to win the item—then, has by nature ‘overpaid’, because they have paid the most money that other bidders would not be willing to pay for the item. The ‘winner’ might feel excited at first that they have won the item, but often later will feel remorse at paying such a high price for it. 

This framework applies closely to World Cup bidding. Countries compete by submitting increasingly ambitious proposals, promising expansive infrastructure projects, tax exemptions, and extensive guarantees to FIFA. The winning host is often the country that most overestimates the economic benefits of hosting or underestimates the true costs. Historical evidence reflects this pattern clearly. Brazil initially estimated $1.1 billion for its 12 World Cup venues, but the stadium budget ultimately rose to more than $4.7 billion. Qatar’s preparations were estimated at roughly $220 billion—about 15× Russia’s reported $14–15 billion for 2018—and unusually large relative to the size of Qatar’s economy. South Africa’s 2010 World Cup similarly fell short of expectations: ex post analysis identified about 66,000 jobs created in venue and facilities construction despite pre-tournament projections of roughly 159,000. Importantly, these outcomes are not the result of random miscalculations. Rather, Flyvbjerg et al. (2002) demonstrate that large public projects systematically suffer from optimism bias, a tendency that is intensified in competitive bidding environments such as the World Cup.

Let’s expand on this dual payoff structure. While hosting the World Cup often fails to generate clear financial returns, it does offer benefits that are harder to quantify and not immediately cash-generating. Hosting brings international prestige and visibility, potentially boosting a country’s global image and attracting tourism in the years that follow. These intangible benefits play a central role in the bidding process, particularly for developing countries that view hosting as an opportunity to signal their arrival on the international stage and reinforce their political credibility as capable global actors. 

As a result, World Cup bidding produces two distinct payoff streams. The economic payoff is frequently negative, taking the form of lost tax revenue, large infrastructure expenditures, and significant opportunity costs. The political payoff, however, is often positive, including international prestige, domestic approval, and career advancement for political leaders. This distinction helps explain persistent overbidding. Politicians reap the political rewards of hosting during their time in office, while the economic costs are spread across taxpayers and future administrations. This creates a classic principal–agent problem, in which decision-makers maximize personal or political utility rather than long-term social welfare.

Several recent World Cup cases illustrate this divergence.  In Brazil, the 2014 World Cup produced evidence of short-term political benefit for national leaders, as Dilma Rousseff’s support increased during the tournament. At the same time, public anger over tournament-related spending fueled widespread protest. In South Africa, officials justified the 2010 tournament in terms of nation-building, social cohesion, and continental pride, even as concerns persisted over its fiscal burden and limited long-term economic return. Qatar similarly used the 2022 World Cup to project international legitimacy, strengthen nation branding, and expand its diplomatic influence, while the costs of hosting were borne at the national level rather than by the decision-makers who benefited politically. Because politicians do not directly bear the economic burden of hosting, overbidding becomes individually rational even when it is socially wasteful. Compounding this problem, governments often rely on consultant reports that systematically inflate projected benefits, providing political cover for decisions that are difficult to justify on economic grounds. 

Finally, beyond domestic political incentives, FIFA’s role in the bidding process further amplifies overbidding. Existing research documents that FIFA routinely demands extensive concessions from host countries, including tax exemptions, control over commercial revenue, legal protections, and guarantees for large-scale infrastructure investments. At the same time, FIFA’s bidding criteria remains highly opaque, limiting transparency and weakening political accountability. Because countries lack access to standardized cost benchmarks or detailed information from past hosts, they are unable to accurately assess the true financial risks of hosting. This opacity allows overly optimistic forecasts to go largely unchecked and intensifies the winner’s curse by preventing meaningful learning across bidding cycles. The financial asymmetry is striking: FIFA captures the vast majority of commercial revenue generated by the World Cup, while host countries bear the full cost of infrastructure, security, and event preparation. This structure incentivizes FIFA to promote aggressive bidding regardless of host-country welfare, suggesting that the bidding process itself is designed to maximize FIFA’s extraction rather than the economic returns of hosting.

World Cup hosting decisions persistently defy economic logic, not because policymakers misunderstand the evidence, but because the incentives surrounding bidding reward overpayment. Competitive bidding creates a winner’s curse in which countries exaggerate benefits to secure hosting rights, while political leaders capture immediate prestige and approval even as long-term fiscal costs fall on taxpayers. FIFA’s opaque bidding process further amplifies these dynamics by extracting revenue while transferring financial risk to host countries.

Overbidding, however, is not inevitable. When hosts rely on existing infrastructure and face stronger institutional constraints, the economic costs of hosting can be significantly reduced. As the 2026 World Cup approaches, jointly hosted by the United States, Canada, and Mexico, these lessons are especially relevant. Without greater transparency and accountability in the bidding process, future tournaments are likely to continue prioritizing political prestige over economic sustainability.