Abstract
We study the design of a team in multi-team contests.Is it better to distribute prizes among players equally, or to just one player? And is it better to spend a budget on a diverse team with stars and rookies, or on an equal team? First, we study these questions theoretically. We f i nd that depending on the production function, it is either optimal to (i) hire superstars and rookies, and reward superstars the most, or (ii) hire a homogeneous team and reward everyone equally. Then, we test the f i rst set of predictions in the lab. Unlike the theory, superstars or concentrated rewards alone do not help a team win. Both must be used together.
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