On Rent Dissipation in Dynamic Multi-battle Contests

Shanglyu Deng, Qiang Fu, Junchi Li and Zenan Wu

Papers from arXiv.org

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.

Date: 2026-04
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