Incentive Effects of a Cut-Off Score: Optimal Contest Design with Transparent Pre-Selection

Abstract: Shortlisting is a common and effective method for pre-selecting participants in competitive settings. To ensure fairness, a cut-off score is typically announced, allowing only contestants who exceed it to enter the contest, while others are eliminated. In this paper, we study rank-order contests with shortlisting and cut-off score disclosure. We fully characterize the equilibrium behavior of shortlisted contestants for any given prize structure and shortlist size. We examine two objective functions: the highest individual performance and total performance. For both objectives, the optimal contest is in a winner-take-all format. For the highest individual performance, the optimal shortlist size is exactly two contestants, but, in contrast, for total performance, the shortlist size does not affect the outcome, i.e., any size yields the same total performance. Furthermore, we compare the highest individual performance achieved with and without shortlisting, and show that the former is 4/3 times greater than the latter.