The Economic Design of Sporting Contests

television viewing of sports events is estimated to be 77 billion hours per year.2 One might add to this several hundreds of millions of hours spent in discussion at the water cooler. Designing an optimal contest is both a matter of significant financial concern for the organizers, participating individuals, and teams, and a matter of consuming personal interest for millions of fans. Not surprisingly, many lawyers and politicians express close interest in the way that sporting contests are run. Economists have something to offer as well. The design of a sporting contest bears a close relationship to the design of an auction. In both cases, the objective of the organizer is to elicit a contribution (a bid, an investment, or some effort) from contestants who may as a result win a prize. The analogy between an auction and a contest/tournament3 is already well known (see e.g. Arye Hillman and John Riley 1979). Given the objective function of the organizer and the