Consuming Contests: Outcome Uncertainty and Spectator Demand for Contest-based Entertainment

61 Pages Posted: 10 Feb 2021

See all articles by Patrick J. Ferguson

Patrick J. Ferguson

Harvard University - Accounting & Control Unit

Karim R. Lakhani

Harvard Business School - Technology and Operations Management Group; Harvard Institute for Quantitative Social Science; Harvard University - Berkman Klein Center for Internet & Society

Date Written: February 7, 2021

Abstract

Contests that are designed to be consumed for entertainment by non-contestants are a fixture of economic, cultural and political life. In this paper, we examine whether individuals prefer to consume contests that have more uncertain outcomes. We look to professional sports and exploit injury-induced changes to teams' lineups to estimate the effect of outcome uncertainty on spectator demand for contests. Drawing on multiple seasons of game-level data from the Australian Football League, we find that game outcome uncertainty has a large effect: a one standard-deviation increase in the outcome uncertainty of a game causes, on average, an 11.2% increase in attendance. We show that this effect is greater: 1) when there is more at stake on the outcome of the contest; and, 2) for teams that have larger, more-dispersed fan bases. Our results extend research on contest design and information preferences by suggesting that spectators are strongly drawn to evenly-balanced contests, behavior consistent with people deriving entertainment utility from suspense and the resolution of uncertainty.

Keywords: Contest design, information preferences, consumer demand

JEL Classification: Z20, L82, L83, M55

Suggested Citation

Ferguson, Patrick J. and Lakhani, Karim R., Consuming Contests: Outcome Uncertainty and Spectator Demand for Contest-based Entertainment (February 7, 2021). Harvard Business School Technology & Operations Mgt. Unit Working Paper No. 21-087, Available at SSRN: https://ssrn.com/abstract=3783339 or http://dx.doi.org/10.2139/ssrn.3783339

Patrick J. Ferguson

Harvard University - Accounting & Control Unit ( email )

Soldiers Field
Boston, MA 02163
United States

Karim R. Lakhani (Contact Author)

Harvard Business School - Technology and Operations Management Group ( email )

Boston, MA 02163
United States
617-495-6741 (Phone)

Harvard Institute for Quantitative Social Science ( email )

1737 Cambridge St.
Cambridge, MA 02138
United States

Harvard University - Berkman Klein Center for Internet & Society ( email )

Harvard Law School
23 Everett, 2nd Floor
Cambridge, MA 02138
United States

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