The Impact of Tie Intervals on Rank-Based Contests

Abstract

In many real-world competitions, heterogeneous players must achieve a substantial advantage to secure victory. We build a contest model that connects this phenomenon by integrating rank-based innovation contest and tug-of-war. Specifically, in our model, there is an interval of output gap where a tie occurs. We find that in equilibrium, players exert a low effort level in the interior of the interval and may exert a high effort level around the two boundaries (where players are about to win or lose). Hence, when this interval is small, the contest is close to being rank-based, and the players exert a high effort level when they are close. When the interval is large, winning is difficult, and therefore, players exert a low effort level even when they are close. This discouragement effect from the tie interval for players who are close strengthens with the tie reward and weakens as contest uncertainty increases.

Keywords: Innovation Contest, Tug-of-War, Information Disclosure, Participation