Read the following and answer the questions below.

The costs of hosting the Olympic Games During Olympic years there is a tangible sense of anticipation for many people who enjoy watching or participating in this sports spectacular. However, for the host city the closing ceremony marks the time to start reconciling the budget. Hosting the Olympics is an expensive endeavour and for some cities the financial challenges have overshadowed the games. Baade and Matheson (2016) note that in most cases the Olympics are a money losing proposition for host cities; they result in positive net benefits only under very specific and unusual circumstances (p.202). Indeed, a comparison of cost overruns in the modern Olympics reveals budget busters across the board: Sydney (2000) 90%, Athens (2004) 60%, Atlanta (1996) 147%, Barcelona (1992) 417% (Newman 2014). Even bidding for the right to host the Olympics is expensive; estimates for Chicago’s unsuccessful bid to host the 2016 games range from $70 million to $100 million (Baade & Matheson 2016). Despite the evidence that financial shortfalls characteristically accompany the Olympic Games, cities still line up to host the games. One reason for this is that cities expect the games to provide both economic and social benefits that compensate for the costs of running the event. However, this so-called Olympic legacy has been questioned, with Berg (2016) arguing that the Olympic movement ‘is the epitome of government waste, almost always doing great harm to its host and taking a real human toll’.

Required 

From the paragraph above it is evident that there is a generally accepted expectation that cities hosting Olympic games will run over budget.

(a) Discuss the forecasting issues that might explain why this is the norm. Why is it so difficult to accurately budget for these events? What types of items need to be included in the budget?

(b) In your opinion, are the financial losses associated with the Olympic games outweighed by the perceived social benefits?