Optimal tie-breaking rules

Abstract: We consider two-player contests with the possibility of ties and study the effect of different tie-breaking rules on effort. For ratio-form and difference-form contests that admit pure-strategy Nash equilibrium, we find that the effort of both players is monotone decreasing in the probability that ties are broken in favor of the stronger player. Thus, the effort-maximizing tie-breaking rule commits to breaking ties in favor of the weaker agent. With symmetric agents, we find that the equilibrium is generally symmetric and independent of the tie-breaking rule. We also study the design of random tie-breaking rules that are ex-ante fair and identify sufficient conditions under which breaking ties before the contest actually leads to greater expected effort than the more commonly observed practice of breaking ties after the contest.