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# Let's say there's a tournament with 10 participants. This is

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Let's say there's a tournament with 10 participants. This is the only tournament of the year, and is the only source of income for each participant. There is \$500,000 total prize money. How would you allocate the prize money among the participants (1st-10th) and why? How may this influence how you would design an individual tax system?

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#### Solution Preview

I see exactly where this question is going ...

Personally, I would divide the money equally and give each player \$50,000 for their participation and effort, but most people would not agree. Most people (including probably your professor) would distribute the money based on effort. We have a total tournament purse of \$500,000, and we have ten players. We would have to rank the players in order, as if we were deciding who came in 1st, who came in 2nd, etc. We now have them ranked by skill order. We then divide the money into ten different sections, with the 1st section containing the most amount, the 2nd section containing a little less ... all the way down to 10th place, which contains the least. If we allocated \$20,000 to 1st place, we would decline from there, giving smaller portions until we were ...

#### Solution Summary

Let's say there's a tournament with 10 participants. This is the only tournament of the year, and is the only source of income for each participant. There is \$500,000 total prize money. How would you allocate the prize money among the participants (1st-10th) and why? How may this influence how you would design an individual tax system?

\$2.19