Draws, productive and destructive activities in contests

This paper investigates the incentive effects of introducing the possibility of a draw in a two-stage contest that involves both destructive and productive activities. In the first stage, players may engage in destructive activities (sabotage) to raise their opponent’s cost of exerting productive activity in the second stage. Although prior studies have shown that allowing for draws generally reduces total activity in contests with only productive inputs, we demonstrate that the presence of a draw can improve incentive structures in settings where sabotage is possible. Specifically, we show that the equilibrium level of sabotage decreases, while the equilibrium level of productive activity increases with the probability of a draw. These findings highlight a previously underappreciated role of draws: by discouraging destructive behaviour, they can indirectly promote productive activity and improve contest efficiency from the designer’s perspective.