Suspense

In a dynamic model of sports competition, we show that when spectators care only about the level of effort exerted by contestants, rewarding schemes that depend linearly on the final score difference provide more efficient incentives for efforts than schemes based only on who wins and loses. This result is puzzling because rank order schemes are the dominant forms of reward in sports competitions. The puzzle can be explained if one takes into account the fact that spectators also care about the suspense in the game. We define spectators\\' demand for suspense as greater utility derived from contestants\\' efforts when the game is closer. As the demand for suspense increases, so does the advantage of rank order schemes relative to linear score difference schemes. When the demand for suspense is sufficiently high, the optimal rank order scheme dominates all linear score difference schemes, and with plausible additional restrictions, it dominates a broad class of incentive schemes that reward contestants on the basis of the final score difference.