Heterogeneous outside options in contests

- Heterogeneous contestants either enter a contest or take their heterogeneous outside options.
- We derive a critical condition determining the type who enters the contest.
- The individual effort is surprisingly independent of the contest prize.
- High types enter the contest if the contest noise is low.
- A contest organizer will not necessarily prefer to have the high types in the contest.

This article describes a large number of contestants with high and low levels of talent who individually decide to enter a contest or take their heterogeneous outside options. We derive a critical condition for which only high types, only low types or both types participate in the contest. If a contest organizer is worried about the type participating in the contest, then he/she should provide a contest with low noise to attract high types. However, if a contest organizer's objective is to maximize the individual effort, he/she will not necessarily prefer to have the high types in the contest.