gareth.jones Section name Department of Economics Centre for Institutional Performance (CIP) Economic Analysis Research Group (EARG) On Fixing International Cricket Matches by Sarah Jewell and J. James Reade Discussion Paper No. 113 October 2014 Department of Economics University of Reading Whiteknights Reading RG6 6AA United Kingdom www.reading.ac.uk © Department of Economics, University of Reading 2014 On Fixing International Cricket Matches∗ Sarah Jewell Department of Economics, University of Reading J. James Reade Department of Economics, University of Reading and Programme for Economic Modelling (EMoD), Institute for New Economic Thinking at the Oxford Martin School October 31, 2014 Abstract Corruption is hidden action which distorts allocations of resources away from competitive outcomes. Hence the detection of such actions is both difficult yet important. In many economic contexts, agent actions are unobservable by principals and hence detection is difficult; sport of- fers a well-measured context in which individual actions are documented in great detail. In recent years the sport of cricket, which records a huge volume of statistics, has been beset by a number of corruption scandals surrounding the fixing of matches. We use 18 one day international (ODI) matches that are known to be fixed by one of the teams involved and anal- yse a wide range of observed statistics from all ODI matches since 1971, in order to determine whether corruption manifests itself in recorded out- comes. We find that corruption does affect a number of observed outcomes in anticipated ways, suggesting that both the increased reporting of statis- tics, and the statistical analysis of them may be a useful tool in detecting corruption. JEL Classification: D73, C50, L83. Keywords: Corruption, Econometric Modelling, Sport. 1 Introduction Corruption is hidden action undertaken by economic agents which distorts al- locations of resources away from competitive outcomes. Being hidden, the problem, thus, is detection of such actions. The more an activity is recorded and documented, the more likely is the detection of actions intended to be hid- den. In this paper we use the context of a copiously documented sport to attempt to detect and understand corruption. ∗We would like to thank the University of Reading for their financial support in the writing of this paper, and Reade would like to thank, in addition, the Open Society Foundations (OSF) and Oxford Martin School (OMS). We also thank Danial Malik and Benjamin Leale-Green for research assistance in the writing of this paper, and Declan Hill and Dorian Owen for helpful suggestions. 1 In recent years the sport of cricket has been beset by a number of corruption scandals surrounding the fixing of matches; Condon (2001), King (2000), and Qayyum (1998) providing three judicial investigations conducted. From the wording of these reports, Condon (2001) in particular, it is clear that what is known about corrupt activity is likely to be a fraction of the total amount of corruption taking place. The problem remains just as pertinent as when these reports were written; de Speville (2011) wrote in another report commissioned by the International Cricket Council (ICC) that \the analysis of corruption in cricket contained in Sir Paul Condon's report of April 2001 remains as valid today as it was then. Regrettably there is no reason to believe that the risk is any less today than it was then.". Sport, and cricket in particular, generate vast amounts of well-measured data, but also attracts those seeking to extract rents and fix outcomes. This increases the likelihood that hidden actions such as agreements to fix competitive outcomes, will manifest themselves in observable outcomes and hence statistics. We present a list of 18 one-day international (ODI) matches that are known to have been fixed by one of the teams involved, based on previous public inves- tigations. We analyse a wide range of observed statistics from ODI matches and find that corruption does affect a number of observed outcomes in anticipated ways. The implication is that the better documentation of economic activity, and the rigorous analysis of such collected data, might be an effective tool in detecting corruption. In Section 2 we outline the nature of match fixing and nest it in an economic theory context before outlining our econometric method for understanding more about the methods of match fixing. In Section 3 we introduce our dataset, and in Section 4 we set out the results of our investigation. Section 5 concludes. 2 Theory and Method Match fixing can be defined as an agreement between interested parties stipulat- ing a particular outcome for an otherwise competitive sporting contest. Preston and Szymanski (2003) provides an economic model of cheating in sports, exam- ining the marginal benefit and marginal cost of engaging in corrupt activity. In their model, sporting participants are approached by ‘fixers’ seeking to ar- range outcomes in order to profit via the placing of bets. These fixers offer the sporting participant a financial package, or bribe, in return for assisting in arranging this outcome.1 They identify the following important dimensions in the subsequent decision of the sporting participant about whether to accept the bribe: • The financial reward from competing honestly, hence the compensation packages of participants, and the reward from winning any given match (in terms of prizes and prestige). • The financial reward from accepting a bribe to fix a match. 1The agreed outcome may not occur as there is a noisy relationship between effort exerted to fix an outcome and the actual outcome. Cricket is an intrinsically uncertain game; book- makers only predict the correct outcome less than 50% of the time (based on a sample of 2,268 bookmaker prices from 139 domestic one-day matches since 2012 in England and Australia). It is also possible that an agent exerts zero effort towards fixing an outcome by reneging on the agreement made. 2 • The level of corruption within the bookmaking industry, and the existence of large underground betting markets. • Likelihood of being caught: This clearly depends on the methods chosen to fix games as well as the efforts directed by authorities to detect corruption. • Severity of punishment: The lighter the punishment, the lesser the deter- rent. Both Condon (2001) and Qayyum (1998) note that pay has often been low in cricket, both as a proportion of the overall turnover of the sport and rela- tive to top performers in other popular sports. Furthermore, there are often matches whose significance is trivial; in a series of matches between two teams, often one team has won sufficiently many matches by the final match such that that match cannot influence the final outcome. Additionally, matches are of- ten played in neutral countries where the game is less popular (for example, Morocco, Malaysia and the UAE); such matches could be argued to have less significance to the competitors.2 Prior to the concerted efforts of the late 1990s and early 2000s, it is reasonable to suggest that the likelihood of being caught was quite low, and furthermore the severity of punishment small too as countries sought to minimise the damage both to the credibility of the sport, and to the strength of their national team caused by players being involved in match fixing. Since the spate of allegations and reports around the turn of the century, it is clear that the ICC has acted substantially along many of these di- mensions; during international matches player communications are now strictly monitored, and a code of practice exists that players must sign and adhere to. Player remuneration has also improved, in places dramatically with, for exam- ple, the advent of the Indian Premier League, a domestic cricket competition. Indeed, de Speville (2011) ostensibly is a review of the measures put in place since Condon (2001), and as well as warning that corruption is likely still rife (both spot fixing and match fixing), suggests a number of tightenings of these procedures by the ICC. Hill (2010) discusses at length the threat of match fixing to professional sport, but the logic is rooted in the uncertainty of outcome hypothesis of Rottenberg (1956); demand for sport depends on the outcome being uncertain, and fixing outcomes by definition reduces that uncertainty. Hill also details some of the methods by which matches are fixed; participants in the targetted match are approached, commonly through a trusted third party (e.g a former player), and usually groomed for the purpose of fixing matches rather than offered bribes outright, in the first instance, for one-off fixes. Instructions will be passed to players regarding the targetted match. Hill considers a number of football matches known to have been fixed, and compares a set of collected statistics regarding these games to those in `clean' games. By considering many of the measured dimensions of such sporting contests, it ought to be possible to learn more about the methods chosen by match fixers. He found that there was no impact on penalties awarded (unless the referee was involved in fixing the match), significantly more own goals and significantly fewer red cards in fixed matches. The implication, consistent with Preston and Szymanski (2003), is 2Historically such neutral venues were chosen to broaden the appeal of the game, but more recently for security reasons Pakistan have been playing their `home' matches in the UAE (see http://goo.gl/Pag3tT for a Wikipedia article on this). 3 that fixers will seek less obvious ways to influence match outcomes to minimise the likelihood of detection; for example, regarding red cards, these are salient events in football matches and are usually heavily analysed at the time and afterwards.3 Football, historically, has been a moderately well recorded game, but not to the extent that cricket has been.