Competition among contests
AbstractWhen several contests compete for the participation of a common set of players, a contest's allocation of prizes not only induces incentive effects but also participation effects. Our model predicts that an increase in the sensitivity with which contest outcomes depend on players' efforts makes flatter prize structures more attractive to participants. In equilibrium, contests that aim to maximize the number of participants will award multiple prizes if and only if this sensitivity is sufficiently high. Moreover, the prize awarded to the winner is decreasing in the contests' sensitivity. We provide empirical evidence from professional road running using race-distance as a measure of sensitivity. We show that steeper prize structures are more attractive to top-ranked runners in longer, that is, less sensitive, races. In line with our theory, longer races do in fact offer steeper prize structures. Copyright (c) 2009, RAND.
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Bibliographic InfoArticle provided by RAND Corporation in its journal The RAND Journal of Economics.
Volume (Year): 40 (2009)
Issue (Month): 4 ()
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Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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- Leuven, Edwin & Oosterbeek, Hessel & van der Klaauw, Bas, 2010.
IZA Discussion Papers
5186, Institute for the Study of Labor (IZA).
- Ghazala Azmat & Marc Möller, 2012.
"The Distribution of Talent across Contests,"
600, Barcelona Graduate School of Economics.
- John Morgan & Dana Sisak & Felix Vardy, 2012. "On the Merits of Meritocracy," Tinbergen Institute Discussion Papers 12-077/1, Tinbergen Institute.
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