Dueling contests and platform's coordinating role

Abstract

Crowdsourcing platforms typically take a passive approach, and let the competing firms freely design their own contests and allow every solver to self-select and join any of the concurrently running contests. In a model of competing noise-driven contests, we show that the duopoly prize allocation has fewer (but larger) prizes compared to a monopolist contest designer. We also find that contests with firm-chosen budgets and solvers' endogenous participation create coordination inefficiencies. Thus, platform policies that constrain the competing firms from freely choosing their budgets, and offer solvers non-enforceable recommendations towards specific noise-driven contests strictly enhance total welfare. Extending our framework to include arbitrarily-correlated ability-driven contests, we highlight the critical role of inter-contest dependence on the efficacy of platform's interventions. Specifically, platform nudges to improve solver-contest (mis)matches are welfare-enhancing only when the contests are sufficiently related, and allowing solvers to self-sort is appropriate otherwise.

Keywords: crowdsourcing; nudges; incentives; multiple contests; endogenous participation