If you build the arena, then you would have to have some sort of rewards system. Here are some examples:
Money-anywhere from 1/4 to 1/2 of the losers current balance(depending on fight).
Items-any item that the loser has(tools, ingots, Iron to Diamond bocks).
Protection Stone
A free house in a city
Land
Here are all my suggestions. If you can think of more the better.