Dueling contests and platform's coordinating role

Abstract

Crowdsourcing platforms typically take a passive approach and let competing firms freely design their contest and allow solvers self-select to compete in any of the concurrently running contests. We characterize the between-firm equilibrium in prize allocations and the induced participation-effort equilibrium among solvers. We find that the self-sorting equilibrium hurts the solvers and the total welfare. Thus, platform policies to coordinate the firms (for example by requiring that the firms choose among a few available budget choices so that contests appear ex-ante similarly attractive to solvers), or policies to coordinate the solvers by recommending and nudging each solver toward a specific contest improve overall welfare.

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