Dividing the Spoils: Strategic Prize Allocation in Team Contests

Abstract

Rival teams compete through battles and reward members only after team victory. We study how team managers allocate victory-contingent reward budgets across players to maximize their teams' winning probabilities in a majoritarian contest. Under a regularity condition on battle technologies, the allocation game has a unique pure-strategy equilibrium. Despite differences in budgets and player costs across teams and technologies across battles, both managers choose the same normalized reward schedule, a property we call reward schedule alignment. Each battle's share is proportional to discriminatory power, closeness, and pivotality. With precommitted rewards, allocations and team-winning probabilities are independent of battle order.

41 pages