The Impact of Organizer Market Structure on Participant Entry Behavior in a Multi-Tournament Environment

Abstract

A multi-tournament environment is analyzed, focusing on the impact of organizer market structure on agent entry behavior. Two high ability agents first decide which tournament to enter (with fields then filled by low ability agents). If the marginal benefit of high ability agents in an event is weakly increasing, a monopsonist organizer sets prizes so that the high ability agents enter the same event. If this marginal benefit is diminishing, a monopsonist organizer will either: always set prizes for which the high ability agents enter different events; or set prizes for which the high ability agents enter different events if and only if the difference in ability between the high ability and low ability agents is sufficiently small. Sequentially competing organizers set prizes for which both high ability agents enter the same event if and only if the marginal benefit of having two high ability agents in one event is relatively large. For competing organizers there may be either a first or second mover advantage. Finally, Social Welfare may be higher or lower with competing organizers, implying greater organizer competition does not necessarily increase Social Welfare. Parallels are noted throughout to the labor market for professional golfers both over years when the PGA TOUR was essentially a monopsonist and more recently when LIV Golf emerged as a competitor.