By David Butler
Last week I came across an interesting story* that explained why Pelé tied his boots just before the start of a 1970 World Cup quarter final match against Peru. What seemed an innocent act by the Brazilian was actually a key juncture in the ‘sneaker wars’ that was on-going during the second half of the 20th century between sports wear firms Puma and Adidas. The narrative provides another nice example of how concepts from game theory can be applied to the sports industry.
As the story goes, the two shoe manufacturers went through a period of intense rivalry in the 1960’s. Both firms vied for a greater market share on the back of growing demand for sneakers, and endorsing athletes became an important advertising tool for the firms. Financially savvy athletes soon wised up to this rivalry and began demanding increasingly significant sums to wear their products. In response to these rising demands, Adidas and Puma began to cooperate with each other, attempting to scale down what had become an arms race for the top sports stars. The most notable form of cooperation at the time was the Pelé Pact; both Adidas and Puma agreed that neither would endorse the world’s greatest footballer for the upcoming 1970 World Cup.
Was the cooperative Pele Pact stable? Well, when Pelé asked the referee for those extra few seconds before kick-off to lace his boots (isn’t it amazing how he decided to tie them just then?), the camera zoomed in to show him wearing a shiny new pair of Puma's.
Apparently, Puma sent a company representative to the Brazil squad and after some negotiations Pelé accepted a lucrative deal to wear the Puma’s. Adidas were naturally furious that Puma breached the Pelé Pact and the fierce rivalry between the two firms recommenced. If Adidas had known that the pure conditions necessary for cooperation were absent they may not have acted so naïvely. The rational Puma scooped the prize!
My first thoughts when I heard this was that it was an urban legend but with a little research it seems the story checks out. For those that want to explore the sneaker wars between Adidas and Puma further, see Barbara Smit's 2009 book Sneaker Wars: The Enemy Brothers Who Founded Adidas and Puma and the Family Feud That Forever Changed the Business of Sports.
*thanks to Sportseconomics.org contributor Gary Burns for introducing this story to me.
Last week I came across an interesting story* that explained why Pelé tied his boots just before the start of a 1970 World Cup quarter final match against Peru. What seemed an innocent act by the Brazilian was actually a key juncture in the ‘sneaker wars’ that was on-going during the second half of the 20th century between sports wear firms Puma and Adidas. The narrative provides another nice example of how concepts from game theory can be applied to the sports industry.
As the story goes, the two shoe manufacturers went through a period of intense rivalry in the 1960’s. Both firms vied for a greater market share on the back of growing demand for sneakers, and endorsing athletes became an important advertising tool for the firms. Financially savvy athletes soon wised up to this rivalry and began demanding increasingly significant sums to wear their products. In response to these rising demands, Adidas and Puma began to cooperate with each other, attempting to scale down what had become an arms race for the top sports stars. The most notable form of cooperation at the time was the Pelé Pact; both Adidas and Puma agreed that neither would endorse the world’s greatest footballer for the upcoming 1970 World Cup.
Was the cooperative Pele Pact stable? Well, when Pelé asked the referee for those extra few seconds before kick-off to lace his boots (isn’t it amazing how he decided to tie them just then?), the camera zoomed in to show him wearing a shiny new pair of Puma's.
Apparently, Puma sent a company representative to the Brazil squad and after some negotiations Pelé accepted a lucrative deal to wear the Puma’s. Adidas were naturally furious that Puma breached the Pelé Pact and the fierce rivalry between the two firms recommenced. If Adidas had known that the pure conditions necessary for cooperation were absent they may not have acted so naïvely. The rational Puma scooped the prize!
My first thoughts when I heard this was that it was an urban legend but with a little research it seems the story checks out. For those that want to explore the sneaker wars between Adidas and Puma further, see Barbara Smit's 2009 book Sneaker Wars: The Enemy Brothers Who Founded Adidas and Puma and the Family Feud That Forever Changed the Business of Sports.
*thanks to Sportseconomics.org contributor Gary Burns for introducing this story to me.
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