As one datapoint, the time spent on my entry to the original worldview prize was strictly additive. I have a grant to do AI safetystuff part time, and I still did all of that work; the work I didn't do that week was all non-AI business.
It's extremely unlikely that I would have written that post without the prize or some other financial incentive. So, to the extent that my post had value, the prize helped make it happen.
That said, when I saw another recent prize, I did notice the incentive for me to conceal information to increase the novelty of my submission. I went ahead and posted that information anyway because that's not the kind of incentive I want to pay attention to, but I can see how the competitive frame could have unwanted side effects.