This experiment compares the performance of two contest designs: a standard winnertake- all tournament with a single fixed prize, and a novel proportional-payment design in which that same prize is divided among contestants by their share of total achievement. We find that proportional prizes elicit more entry and more total achievement than the winner-take-all tournament. The proportional-prize contest performs better by limiting the degree to which heterogeneity among contestants discourages weaker entrants, without altering the performance of stronger entrants. These findings could inform the design of contests for technological and other improvements, which are widely used by governments and philanthropic donors to elicit more effort on targeted economic and technological development activities.
Cason, T.N., Masters, W.A., & Sheremeta, R.M. (2010). Entry into winner-take-all and proportional-prize contests: An experimental study. ESI Working Paper 10-09. Retrieved from http://digitalcommons.chapman.edu/esi_working_papers/122