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

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