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Competition among contests

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  • Ghazala Azmat
  • Marc Möller

Abstract

When 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.

Suggested Citation

  • Ghazala Azmat & Marc Möller, 2009. "Competition among contests," RAND Journal of Economics, RAND Corporation, vol. 40(4), pages 743-768, December.
    • Handle: RePEc:bla:randje:v:40:y:2009:i:4:p:743-768
    DOI: 10.1111/j.1756-2171.2009.00087.x
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - 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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