Competition for recruitment purposes, also known as "gamification" is a relatively new concept and it is a technique that has mostly been used by the IT industry, with coder challenges, multidiscipline hack-fests, engineering contests, and actual computer or video games. One example of an extended competition, which is outside the IT industry, is the television show called "The Apprentice", which aims at finding a top-class candidate through a number of challenges to work for a successful entrepreneur. Keep it real—keep your contest strictly technical.
The premise for competition is to have a complex problem, which will attract the real problem solvers from the student community. Facebook is known to have hosted this kind of competition, albeit with an alcohol factor attached. They hired their first employees in this way and to this day they still host some competitions, which lead to interviews. The type of problem that...