Review of Business and Economics Studies, 2015, том 3, № 1
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Review of Business and Economics Studies EDITOR-IN-CHIEF Prof. Alexander Ilyinsky Dean, International Finance Faculty, Financial University, Moscow, Russia ailyinsky@fa.ru EXECUTIVE EDITOR Dr. Alexander Kaffka EDITORIAL BOARD Dr. Mark Aleksanyan Adam Smith Business School, The Business School, University of Glasgow, UK Prof. Edoardo Croci Research Director, IEFE Centre for Research on Energy and Environmental Economics and Policy, Università Bocconi, Italy Prof. Moorad Choudhry Dept.of Mathematical Sciences, Brunel University, UK Prof. David Dickinson Department of Economics, Birmingham Business School, University of Birmingham, UK Prof. Chien-Te Fan Institute of Law for Science and Technology, National Tsing Hua University, Taiwan Prof. Wing M. Fok Director, Asia Business Studies, College of Business, Loyola University New Orleans, USA Prof. Konstantin P. Gluschenko Faculty of Economics, Novosibirsk State University, Russia Prof. George E. Halkos Associate Editor in Environment and Development Economics, Cambridge University Press; Director of Operations Research Laboratory, University of Thessaly, Greece Dr. Christopher A. Hartwell President, CASE - Center for Social and Economic Research, Warsaw, Poland Prof. S. Jaimungal Associate Chair of Graduate Studies, Dept. Statistical Sciences & Mathematical Finance Program, University of Toronto, Canada Prof. Bartlomiej Kaminski University of Maryland, USA; Rzeszow University of Information Technology and Management, Poland Prof. Vladimir Kvint Chair of Financial Strategy, Moscow School of Economics, Moscow State University, Russia Prof. Alexander Melnikov Department of Mathematical and Statistical Sciences, University of Alberta, Canada Prof. George Kleiner Deputy Director, Central Economics and Mathematics Institute, Russian Academy of Sciences, Russia Prof. Kwok Kwong Director, Asian Pacific Business Institute, California State University, Los Angeles, USA Prof. Dimitrios Mavrakis Director, Energy Policy and Development Centre, National and Kapodistrian University of Athens, Greece Prof. Steve McGuire Director, Entrepreneurship Institute, California State University, Los Angeles, USA Prof. Rustem Nureev Head of the Department of Economic Theory, Financial University, Russia Dr. Oleg V. Pavlov Associate Professor of Economics and System Dynamics, Department of Social Science and Policy Studies, Worcester Polytechnic Institute, USA Prof. Boris Porfiriev Deputy Director, Institute of Economic Forecasting, Russian Academy of Sciences, Russia Prof. Svetlozar T. Rachev Professor of Finance, College of Business, Stony Brook University, USA Prof. Boris Rubtsov Chair of Financial Markets and Financial Engineering, Financial University, Russia Dr. Minghao Shen Dean, Center for Cantonese Merchants Research, Guangdong University of Foreign Studies, China Prof. Dmitry Sorokin Deputy Rector for Research, Financial University, Russia Prof. Robert L. Tang Vice Chancellor for Academic, De La Salle College of Saint Benilde, Manila, The Philippines Dr. Dimitrios Tsomocos Saïd Business School, Fellow in Management, University of Oxford; Senior Research Associate, Financial Markets Group, London School of Economics, UK Prof. Sun Xiaoqin Dean, Graduate School of Business, Guangdong University of Foreign Studies, China REVIEW OF BUSINESS AND ECONOMICS STUDIES (ROBES) is the quarterly peerreviewed scholarly journal published by the Financial University under the Government of Russian Federation, Moscow. Journal’s mission is to provide scientific perspective on wide range of topical economic and business subjects. CONTACT INFORMATION Financial University Leningradskiy Av. 51 Building 3, 125993 Moscow Russian Federation Telephone: +7(499) 943-95-23 Website: www.robes.fa.ru AUTHOR INQUIRIES Inquiries relating to the submission of articles can be sent by electronic mail to robes@fa.ru. COPYRIGHT AND PHOTOCOPYING © 2015 Review of Business and Economics Studies. All rights reserved. No part of this publication may be reproduced, stored or transmitted in any form or by any means without the prior permission in writing from the copyright holder. Single photocopies of articles may be made for personal use as allowed by national copyright laws. ISSN 2308-944X
Вестник исследований бизнеса и экономики ГЛАВНЫЙ РЕДАКТОР А.И. Ильинский, профессор, декан Международного финансо вого факультета Финансового университета ВЫПУСКАЮЩИЙ РЕДАКТОР А.В. Каффка РЕДАКЦИОННЫЙ СОВЕТ М. М. Алексанян, профессор Бизнесшколы им. Адама Смита, Университет Глазго (Великобритания) К. Вонг, профессор, директор Института азиатско-тихоокеанского бизнеса Университета штата Калифорния, Лос-Анджелес (США) К. П. Глущенко, профессор экономического факультета Новосибирского госуниверситета С. Джеимангал, профессор Департамента статистики и математических финансов Университета Торонто (Канада) Д. Дикинсон, профессор Департамента экономики Бирмингемской бизнесшколы, Бирмингемский университет (Великобритания) Б. Каминский, профессор, Мэрилендский университет (США); Университет информационных технологий и менеджмента в Жешове (Польша) В. Л. Квинт, заведующий кафедрой финансовой стратегии Московской школы экономики МГУ, профессор Школы бизнеса Лассальского университета (США) Г. Б. Клейнер, профессор, член-корреспондент РАН, заместитель директора Центрального экономико-математического института РАН Э. Крочи, профессор, директор по научной работе Центра исследований в области энергетики и экономики окружающей среды Университета Боккони (Италия) Д. Мавракис, профессор, директор Центра политики и развития энергетики Национального университета Афин (Греция) С. Макгвайр, профессор, директор Института предпринимательства Университета штата Калифорния, Лос-Анджелес (США) А. Мельников, профессор Депар та мента математических и ста тистических исследований Университета провинции Альберта (Канада) Р. М. Нуреев, профессор, заведующий кафедрой “Экономическая теория” Финансового университета О. В. Павлов, профессор Депар та мента по литологии и полити ческих исследований Ворчестерского политехнического института (США) Б. Н. Порфирьев, профессор, член-корреспондент РАН, заместитель директора Института народнохозяйственного прогнозирования РАН С. Рачев, профессор Бизнес-колледжа Университета Стони Брук (США) Б. Б. Рубцов, профессор, заведующий кафедрой “Финансовые рынки и финансовый инжиниринг” Финансового университета Д. Е. Сорокин, профессор, членкорреспондент РАН, проректор Финансового университета по научной работе Р. Тан, профессор, проректор Колледжа Де Ла Саль Св. Бенильды (Филиппины) Д. Тсомокос, Оксфордский университет, старший научный сотрудник Лондонской школы экономики (Великобритания) Ч. Т. Фан, профессор, Институт права в области науки и технологии, национальный университет Цин Хуа (Тайвань) В. Фок, профессор, директор по исследованиям азиатского бизнеса Бизнес-колледжа Университета Лойола (США) Д. Е. Халкос, профессор, Университет Фессалии (Греция) К. А. Хартвелл, президент Центра социальных и экономических исследований CASE (Польша) М. Чудри, профессор, Университет Брунеля (Великобритания) Сун Цяокин, профессор, декан Высшей школы бизнеса Гуандунского университета зарубежных исследований (КНР) М. Шен, декан Центра кантонских рыночных исследований Гуандунского университета (КНР) Издательство Финансового университета 125993, Москва, ГСП-3, Ленинградский проспект, 51, корп. 3, к. 104. Тел. 8 (499) 943-95-23. Интернет: www.robes.fa.ru. Журнал “Review of Business and Economics Studies” (“Вест ник исследований бизнеса и экономики”) зарегистрирован в Федеральной службе по надзору в сфере связи, информационных технологий и массовых коммуникаций 9 июля 2013 г. Свидетельство о регистрации ПИ № ФС77-54658. Подписано в печать: 20.04.2015. Формат 60 × 84 1/8. Заказ № 330 от 20.04.2015. Отпечатано в ООП Издательства Финуниверситета (Ленинградский проспект, д. 49). 16+
CONTENTS Political Economy of Olympic Games Rustem Nureev, Evgeny Markin 5 The Phenomenon of National Development Bank: Theoretical Foundation and Effectiveness Elizaveta Selyavina 34 Monetary Policy in Russia: Recent Challenges and Changes in Unstable Economic Conditions Natalia Giblova 57 Market Concentration and Competition in Vietnamese Banking Sector Le Hai Trung 67 Remittances and Economic Growth in Vietnam: An ARDL Bounds Testing Approach Dang The Tung 80 Corporate Insurance in the Russian Electric Power Industry Nadezda Kirillova, Victoria Bazhenova 89 Review of Business and Economics Studies Volume 3, Number 1, 2015
CОДЕРЖАНИЕ Политическая экономия Олимпийских игр Рустем Нуреев, Евгений Маркин 5 Феномен национального банка развития: теоретические аспекты и эффективность деятельности Елизавета Селявина 34 Денежно-кредитная политика в России: текущие проблемы и изменения в условиях экономической неопределенности Наталья Гиблова 57 Рыночная концентрация и конкуренция в банковском секторе Вьетнама Ле Хай Чунг 67 Влияние денежных переводов на экономический рост во Вьетнаме Данг Зе Тчунг 80 Корпоративное страхование в российской энергетической промышленности Надежда Кириллова, Виктория Баженова 89 Вестник исследований бизнеса и экономики № 1, 2015
Review of Business and Economics Studies Volume 3, Number 1, 2015 * Политическая экономия Олимпийских игр. 1. REVIEW The role of sports mega events in economic and political life of the nations has strongly increased. That is why the investigation of these processes is very important. Economy of physical culture and sports in the history of Russian sports science was studied by the scientists of Russian State University of Physical Training, Sport and Tourism B. S. Kuzmak and R. M. Orlov. Later this problem was investigated also by V. I. Zholdak and V. E. Levitin. The questions of correlation between productivity and physical education was investigated by V. I. Zholdak. A. M. Alekseev considered the four most important factors determining the cost-effectiveness of sports. Issues of social and economic efficiency are also reflected in the works of S. M. Oksanych, Y. F. Trusov, etc. The most important theoretical aspects of the economy of physical culture and sports in different periods were researched by V. M. Rutgayzer and V. V. Galkin. Political Economy of Olympic Games* Rustem NUREEV, Doctor of economics, Professor Head of Department of Economic Theory, Financial University; Professor at National Research University — Higher School of Economics, Moscow nureev50@gmail.com Evgeny MARKIN, Ph. D., Senior Lecturer Russian State University of Physical Education, Sport, Youth and Tourism, Moscow ev-markin@yandex.ru Abstract. The purpose of the article is to analyze how IOC voting process modifies the Olympic ideals and sport development in host countries. The authors analyze a representative democracy within the Olympic Movement (the features of the functioning of the IOC, NOCs and other public organizations in the process of Olympic Games preparation). The article discusses the features of the decision making process at different stages of the hosting country selection. Candidature Acceptance Procedure includes 11 indicators. The authors describe these indicators and analyze the importance of each of them for final score. A special attention is paid to the voting procedure in the final part of the decision. The authors investigate the factors contributing to the development of principal-agent problem, logrolling and bureaucracy. Features of voting and logrolling are based on the choice of 2014 Olympic Winter Games capital (Sochi, Russia). Influence of Olympic Games on the host country’s economy is investigated on the base of major macroeconomic factors. Authors show the dependence between chosen model of administration and financing and economy and sport development in SR and LR. The authors draw conclusions on how to improve the constitutional framework for the reduction of the prerequisites for the emergence of informal relations in the decision to host sports mega events. Аннотация. В статье рассматривается прямая и представительная формы демократии и их проявление в Олимпийском движении. Авторы подробно анализируют процесс выбора столицы очередных Олимпийских игр, его слабые стороны. Особое внимание уделено выборам Сочи — столицы зимних Олимпийских игр 2014 года. Авторы дают анализ издержек и выгод на разных этапах олимпийского делового цикла, рассматривают особенности экономической и политической деловой активности и факторов, от которых они зависят. Статья также посвящена анализу влияния Олимпийских игр на экономику страны их проведения. Выделены модели управления и финансирования Олимпийских игр и дан анализ их применения в странах, проводивших Олимпийские игры в 1992–2008 гг. Key words: Olympic Games, decision making process, voting procedure, direct democracy, political business cycle, International Olympic Committee.
Review of Business and Economics Studies Volume 3, Number 1, 2015 V. I. Koval (1978) has investigated the economic issues of XX Olympic Games in Munich and tried to use this experience for XXII Olympics in Moscow. His work was published in 1978. Foreign publications in sport economy are more diversified. A monographic “Economy of Sport” (by professors Wladimir Andreff and Jean-François Nys) was released in 1986 in Paris and reprinted in 2002. In 2007 Wladimir Andreff and Sandrine Poupaux published the work “The International Dimension of the Sport Economy in Transition Countries”. Interesting aspects of sport influencing on Europe’s economy was described by D. Dimitrov, L. Helmenshtayn, B. Moser, A. Klyaysner and J. Schindler. They analyzed the sport’s impact on the European economy and its influence on Europe’s GDP. In the works of L. Kann and P. Stodohar the interaction of sport and the labor market is described and their influence on each other is examined. Holger Preuss (2000) investigated the economic conditions of Olympic Games hosting. Shank M., I. Blekshow, D. Hogg, S. Brown, W. Sutton, D Duffy, R. Noll and A. Zimbalist paid great attention to sport management and its importance for infrastructure development and new jobs creation. Researches in the field of Olympic Games economy were made by R. Barney, A. Oberger, F. Brunet, O. Shants, R. Mandell, A. Gutman. Public choice questions concerning Olympic Games are still not sufficiently researched. A large quantity of material is contained in the newsletters (so-called Marketing Matters) and official reports of International Olympic Committee. They are published periodically and are the most complete source of information about international Olympic movement activity now. 2. OLYMPIC MOVEMENT: IOC VOTING PROCEDURE MATTER For clear understanding how voting procedure influences the results of decision making process in Olympic movement let’s look at the history and structure of IOC. Central to the international sporting life and a base for the growth in business activity in modern world is the Olympic movement, which is rightfully occupies a leading place among the various social and cultural phenomena, and has a direct impact on the economic development of the Olympic Games host country. The international Olympic movement is a kind of institution, under which the large number of sports federations, national Olympic committees (NOC), sports competitions are held. The first Olympic Games took place in 776 BC in Ancient Greece. The concept of modern Olympism belongs to Pierre de Coubertin, on whose initiative in June 1894 in Paris was organized the International Athletic Congress, where on June 23, 1894 the International Olympic Committee (IOC) was founded. The need to create the IOC as an organizational and management structure was obvious — without it, all the international Olympic movement was ineffective and unsustainable organization. Only permanent management authority with appropriate financial, organization and human resources was able to solve complex problems of international scope. IOC is nternational non-governmental organization, established as an association with l not-profit status. It recognized by the Swiss Federal Council in accordance with the contract, which came into force on November 1, 2000. Document governing the basic mechanisms of economic management of the modern Olympic Games and the Olympic movement in general is the Olympic Charter. This is a set of fundamental principles of Olympism, rules and byelaws adopted by the International Olympic Committee. The Olympic Charter governs the structure, mechanism of action and processes of the Olympic movement and determines the conditions of the Olympic Games. It performs three main tasks: 1) regulates the basic principles and essential values of Olympism; 2) is a charter of the IOC; 3) defines the basic rights and responsibilities of the three main constituents of the Olympic Movement: the International Olympic Movement, the International Federations and National Olympic Committees and Organizing Committees for the Olympic Games, which must comply with the Olympic Charter. In 1986, the IOC brings together 164 national Olympic Committees (NOC); in 2004 at the Olympic Games in Athens, they became 201. Another important principle of Olympic Movement management is its independence on political influence of individual states and political units. Obviously, if the Olympic institutions will be under someone else’s political influence, they quickly lose their international prestige and global significance. The same can be said about financial independence on any commercial or public organizations. These norms are reflected in the Olympic Charter and allow IOC to maintain its political and commercial independence. IOC is developing special marketing programs to raise money and create a sound financial base for the development of the Olympic movement. A priority for the IOC is to implement programs to broadcast the Olympic Games through telecommunications companies, programs to work with corporate sponsors, minting of commemorative coins and medals, etc.
Review of Business and Economics Studies Volume 3, Number 1, 2015 Principles listed above were the basis of the practical operation of the IOC in the following areas: • Regular organization of Olympic Games; • Definition of the Games and composition of the participants (in collaboration with sports federations and National Olympic Committee of the Games); • Registration of Olympic records; • Placing orders for the Olympic marketing programs and overseeing their implementation; • Overseeing the distribution of funds among the National Olympic Committees and international sports federations; • Promotion of sports and strengthening of friendship among athletes in the IOC member countries; • Dissemination of ideas of Olympism and healthy lifestyle; • Supporting development centers for sporting events. It should be noted that one of the basic principles by which the IOC in choosing the next capital of the Games is what legacy of the Olympic Games for future generations will be left and what economic and social effect will have the city, region and country of the Games. The total number of IOC should not exceed 115 members, which can only be individuals, representatives of member states of IOC. Composition of the IOC shall be elected at a general meeting, called the session. Sessions are held at intervals not less than once a year. The organizational structure of the IOC is presented in Figure 1. At the IOC session the president and members of the IOC Executive Board are elected. Let’s look at fund ing mechanisms of the international Olympic movement and distribution of financial flows. Direct democracy is political system in which every citizen has the right to personally express his/her view and vote on any particular issue. Direct democracy is typical for the assembly of labor collectives of enterprises and institutions,, party meetings and conventions. In a national scale it is the choice of parliament members, or the president conducting nation-wide referendum. Decision-making procedure (the rules) in this situation is the main focus. Direct democracy is not the dominant form in the Olympic movement. It remains as a subordinate element of representative democracy. Majority rule is not a standard in terms of the effectiveness of the decision. Alternatives to majority rule are the two-step rule relative majority, multistep binary voting procedure for approving the ballot, a simple majority of the knock-out and generally exclude the losers on the board. It is obvious that the Olympic movement cannot apply the rule of unanimity in decision-making. This rule applies to the UN Security Council, for example. IOC, of course, tries to take into account the opinion of all the voting for some solutions, but everyone’s opinion into account not his best. That is why every 2 years on the IOC sessions the rule of simple majority of the knockout is using, to select the next Olympic Games host city. A voter in fact cannot select multiple capitals of Games, guided by the idea that a sailing competition, for example, would be better held in Rio-de-Janeiro, IOC President IOC Board: 4 Vice-Presidents + 10 Members International Olympic Committee (115 Members) IOC session IOC Members NOC Members ISF Members IOC Commission of Sportsmen C a n d i d a t e s Figure 1. IOC organizational structure*. * Created on the base of the data from: www.olympic.org.
Review of Business and Economics Studies Volume 3, Number 1, 2015 and athletics — in Moscow. Thus, the choice made in favor of only one candidate. And those of programs that are known to be better with the other candidate, in this case are as “good with a load” (Nureev, 2005). It is important to point out that in the IOC and modern Olympic Movement’s activity the desire to realize the idea of “micro space”, formulated by the American President John Adams in 1780s, can be traced. He believed that parliament should be an accurate portrait of the nation as a whole. In our case we are talking about the Olympic Movement’s governing bodies, which consist of representatives of different nations. Unfortunately, the relationship between decision making and level of economic development of member countries and their political influence is observed. The history of the modern Olympic Games (since 1896) shows that developed countries which now form the so-called G8 or G20 (see Table 1) are most likely to host the Games. The struggle of countries with weak economies to host the Olympics often finish at the stage of choosing a candidate city. The final choice is made among the developed countries’ representatives. These cities can spend on the Games the necessary funds, which allow to get a profit from the Games in future. Thus, there is a conflict between the ideas and ideals of the Olympic movement and the IOC and their actual deeds. Even the recent decision to hold the 2016 Olympics in Rio de Janeiro, unfortunately, does not give the right to speak about positive trends. Olympic movement has a procedure for selection of the capital of the next Olympic Games. As any other large institution, IOC has its own rules. The choice is made from a limited number of participants, formed by the IOC during the pre-selection. International Olympic Committee has developed a special system of Applicants and Candidate Cities estimation. When the two-phase candidature proce Table 1. Relationship between decision making and level of economic development of member countries and their world market power (since 1896). Country G8 G20 Olympiads Olympic Winter Games Total # GDP per capita (2009) USA Yes Yes 4 4 8 45 989 France Yes Yes * 2 3 5 41 051 United Kingdom Yes Yes 3 0 3 35 165 Germany Yes Yes * 2 1 3 40 670 Italy Yes Yes * 1 2 3 35 084 Canada Yes Yes 1 2 3 39 599 Japan Yes Yes 1 2 3 39 738 Australia Yes 2 2 42 279 Austria Yes * 2 2 45 562 Greece Yes * 2 2 29 240 Norway Yes * 2 2 79 089 Russia (USSR) Yes Yes 1 1 2 8 684 Switzerland Yes * 2 2 63 629 Belgium Yes * 1 1 43 671 Brazil Yes 1 1 8 121 Spain Yes * 1 1 31 774 China Yes 1 1 3 744 Mexico Yes 1 1 8 143 Netherlands Yes* 1 1 47 719 Finland Yes * 1 1 44 581 Sweden Yes * 1 1 43 654 Yugoslavia (Bosnia & Herzegovina) 1 1 4 525 South Korea Yes 1 1 17 078 * EU countries represents in G20 as one country (union). Created on the base of: www.gamesbids.com and World Bank.
Review of Business and Economics Studies Volume 3, Number 1, 2015 Table 2. Indicators of Candidature Acceptance Procedure for the Games of XXXI Olympiad in 2016*. * Games of XXXI Olympiad 2016 Working Group Report, Lausanne, 2008.
Review of Business and Economics Studies Volume 3, Number 1, 2015
Review of Business and Economics Studies Volume 3, Number 1, 2015 dure was introduced, the IOC Executive Board considered that the assessment of Applicant Cities should be supported by decision-making software. “Decision Matrix” was selected from a number of options to assist with the assessment of the 2008 Applicant Cities, based on experience with projects of a similar type. Decision Matrix was formed in 1983 for the purpose of developing decision software catering to large and very specific decision-making processes in organizations. The Decision Matrix software uses graphic user interfaces to display results in an easily interpretable fashion. In consultation with the IOC, Decision Matrix developed the “OlympLogic” decision model — based on an already proven decision model “OptionLogic” — which computes the best option amongst a number of contenders. The OlympLogic program enables the assessment of the Applicant Cities on the basis of a number of IOC specific criteria. Matrix was successfully used by the IOC in the assessment of the 2010, 2012 and 2014 Applicant Cities, as well as in the assessment of the bidding cities for the 2010 Youth Olympic Games. Candidature Acceptance Procedure includes 11 indicators: 1. Government support, legal issues and public opinion (including compliance with the Olympic Charter and the World Anti-Doping Code); 2. General infrastructure; 3. Sports venues; 4. Olympic Village (s); 5. Environmental conditions and impact; 6. Accommodation; 7. Transport concept; 8. Safety and security; 9. Experience from past sports events; 10. Finance; 11. Overall project and legacy. Each indicator can be in a range between 1 to 10. The acceptable minimum is six. If city receives less than 6 then this indicator is colored in matrix in red color. It is the signal that city is not developed enough. Let’s illustrate this procedure on the example of Games of XXXI Olympiad 2016 (see Table 2). As we can see in Table 2, Prague and Baku do not have enough support according to members of Working Group. All the results are summarized in the final Figure. 2. Final Result of Working Group Report for estimation of Games of XXXI Olympiad 2016 Applicant Cities. Source: Games of XXXI Olympiad 2016 Working Group Report. Table 3. Bid Index on the eve of 2014 Winter Olympics final voting. CITY HIGH LOW CHG INDEX PyeongChang 64.99 55.72 +00.09 64.99 Salzburg 65.35 60.63 -01.31 62.62 Sochi 63.17 56.71 +02.22 63.17 Source: www.gamesbids.com Table 4. Bid Index on the eve of 2016 Olympics final voting. CITY HIGH LOW CHG INDEX Chicago 61.24 58.78 +1.23 61.24 Madrid 59.50 57.80 0.00 57.80 Rio-de-Janeiro 61.61 59.73 -0.19 61.42 Tokyo 61.41 59.20 -0.18 59.02 Source: www.gamesbids.com
Review of Business and Economics Studies Volume 3, Number 1, 2015 decision (Figure 2). As you can see Prague and Baku were not recommended by Working Group. This decision has preliminary status and other cities could also be declined at the last stage. For example, Doha was also declined as a candidate city for the Games of XXXI Olympiad in 2016. This procedure always takes place inside IOC. International sport analytical agencies have their own ratings. They analyze the same indicators and present Bid Indexes. The Bid Indexes of GamesBids Agency on the eve of 2014 and 2016 Olympics final voting are presented in the Tables 3 and 4. Bid Index includes the lowest and highest estimation and the last changes. In Table 3 we can see that Sochi left off PyeongChang but demonstrated the highest level of Bid Index Increase. It became the crucial factor for the win. Rio de Janeiro was the leader on the eve of final voting but there was a small decrease of index. Nevertheless it did not influence the final result, and Rio de Janeiro was elected as the capital of 2016 Olympics. As noted earlier, IOC members make a decision about Olympic Games next capital using the simple majority rule with a knockout. We shall consider it in detail. In a simple majority of knock-out (the Australian system of voting) wins the candidate who gains a simple majority (see Table 5). However, in the absence of a simple majority at the first stage the candidate with the fewest votes is left. In our example it is E (E - 2). During the multistep voting system, each time a candidate with the fewest votes is eliminated.. In our example it is B (B - 13 out of 22). Olympic Games Capital voting procedure is the following: • More then 100 International Olympic Committee members take part in the voting; • International Olympic Committee members from the countries presented by the candidate cities are not voting; Table 5. Simple Majority With Exclusion (Australian Voting System). a) Group I (4 voters) Group II (6 voters) Group III (7 voters) Group IV (3 voters) Group V (2 voters) A C E B D D C E B A B E C D A C D E B A E B A C D When there is no winner by simple majority, alternative that scored least votes is excluded (E – 2). b) Group I (4 voters) Group II (6 voters) Group III (7 voters) Group IV (3 voters) Group V (2 voters) A C B D D C B A B C D A C D B A B A C D C — 3. Excluded c) Group I (4 voters) Group II (6 voters) Group III (7 voters) Group IV (3 voters) Group V (2 voters) A B D D B A B D A D B A B A D A — 4. Excluded d) Group I (4 voters) Group II (6 voters) Group III (7 voters) Group IV (3 voters) Group V (2 voters) B D D B B D D B B D Winner is B — 13 of 22.