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.