abilities. This, in turn, has adverse consequences for who might want to participate in a tournament. Since better contestants … anticipate that they will be sabotaged more strongly, it may happen that the most able stay out and the tournament selects one of …

A standard tournament contract specifies only tournament prizes. If agents' performance is measured on a cardinal scale …, the principal can complement the tournament contract by a gap which defines the minimum distance by which the best … performing agent must beat the second best to receive the winner prize. We analyze a tournament with two risk averse agents …