Willingness to fight on: Environmental quality in dynamic contests

Haoming Liu, Jingfeng Lu and Alberto Salvo

RAND Journal of Economics, 2023, vol. 54, issue 2, 189-239

Abstract: We show that the prevalence of prolonged tennis contests drops sharply when the ambient environment deteriorates through heat or pollution. We develop a multi‐battle dynamic model to investigate how the disutility from a protracted competition shapes agents' willingness to fight on. Our theory predicts that a poor environment amplifies the momentum of a competitor's head start. We show how model primitives including preferences for environmental amenities can be inferred from battle‐to‐battle transition probabilities. We find that heat and pollution affect incentives to compete strategically. In a contest between equally able rivals at the median prize of $15,100, the value of a head start is $130‐370 higher in a degraded environment compared with a climate‐controlled one.

Date: 2023
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