Suspense: Dynamic Incentives in Sports Contests

Abstract

In a dynamic model of sports competition, if spectators care only about contestants' efforts, incentive schemes depending linearly on the final score difference dominate rank order schemes based only on who wins. If spectators also care about suspense, defined as valuing more contestants' efforts when the game is closer, rank order schemes can dominate linear score difference schemes, and this will be the case when the demand for suspense is sufficiently high. Under additional assumptions, we show that the optimal rank order scheme dominates a broad class of incentive schemes.