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Authors:

• Hao LI
  and University of Toronto

• William CHAN
  The University of Hong Kong

• Pascal COURTY
  University of London

Rank order tournaments are the dominant form of rewarding schemes used in sports competitions. In a dynamic model of sports games, we find that linear score difference schemes dominate rank order schemes when the audience cares about efforts per se. We define demand for suspense as when audience cares about efforts only when the game is close. The more the audience demands suspense, the better rank order schemes perform relative to linear score difference schemes. In the limiting case where the audience's demand for suspense is so high that the exogenous randomness in the game outcome allows greater probability of outcome reversal than what the audience cares about, the optimal rank order tournament approximates the first best efforts.