Economic Theory Seminar Series - Qiang Fu (NUS)

Title: On Equilibrium Effort in Dynamic Multi-Battle Contests

Abstract: We study dynamic multi-battle contests and examine how the contest structure shapes dynamic incentives and determines the extent of rent dissipation. A discouragement effect often arises—such as in tug-of-war and best-of-K contests—preventing full rent dissipation even when the series can extend infinitely. We identify a structural property, exchangeability, that contributes to the effect. Leveraging this insight, we establish a necessary and sufficient condition for almost-full rent dissipation. As an application, we introduce the iterated incumbency contest, which illustrates how volatility in the surrounding environment sustains dynamic incentives and generates almost-full rent dissipation, and thus offers insights into various competitive phenomena.