We study an elimination tournament with heterogenous contestants whose ability is common-knowledge. Each pair-wise match is modeled as an all-pay auction. Equilibrium efforts are in mixed strategies, yielding complex dynamics: endogenous win probabilities in each match depend on other matches’ outcome through the identity of the expected opponent in the next round. The designer seeds competitors according to their ranks. For tournaments with four players we find optimal seedings for three different criteria: (1) maximization of total tournament effort; (2) maximization of the probability of a final among the two top ranked teams; (3) maximization of the win probability for the top player. We also find the seedings ensuring that higher ranked players have a higher winning probability. We compare our predictions with data from NCAA basketball tournaments.
