Multiple Prizes in Tournaments with Career Concerns

We introduce career concerns into rank-order tournaments and offer a novel explanation for the pervasiveness of multiple prizes. We argue that career-concerned individuals, already facing market pressure to perform, will be reluctant to participate in winner-take-all competitions. To entice them and maximize performance, the organizer promises a softer competition through additional prizes. We show that the optimal (minimum) number of prizes is hump-shaped in the population's talent variance and increasing in publicly dis- closed ranks. We also examine entry fees, talent pre-screening, and prize budget as design tools for tournaments, along with prize allocation