An Equilibrium Analysis of Competing Contests

Abstract

Crowdsourcing platforms typically take a passive approach and let solvers self-select which (if any) of the concurrently running contests they wish to participate into. Thus, firms which set prizes and organize contests on these platforms are competing among themselves (for solver participation and effort). We model this competition among contests, and solve for the equilibrium solver participation and characterize the equilibrium among the firms. Next we compare the outcomes to a setting where the platform can “nudge” the solvers toward a particular contest (i.e., platforms can recommend a contest for a given solver, but cannot enforce participation). Our main results reveal that solvers' self-sorting into contests hurts the solvers, the firms and the platform. Thus, platform policies to nudge solver entry improve overall welfare.