Disclosing Effort in Dynamic Team Contests With Effort Complementarity

Abstract

This paper studies strategic effort disclosure in dynamic team contests. Two teams of two players compete in a Tullock contest with teammates' sequential efforts aggregated across two periods using a Cobb–Douglas production function. We examine how equilibrium efforts and winning probabilities are affected by the teams' communication policies: no communication, private communication (efforts shared internally with stage-2 teammates), and public communication (efforts disclosed to stage-2 rivals as well). To describe asymmetric information generated by privately observable efforts for each communication policy profile, we use a perfect Bayesian equilibrium with an appropriate belief refinement for multistage complete information games. In the unique positive-effort equilibrium, the optimal choice of a communication strategy differs for the favorite (the strong team) and the underdog (the weak team). Private communication only benefits the underdog team, fostering effort complementarity and improving their chances of winning and payoffs. In contrast, the favorite team prefers either public or no communication to deter rival efforts or avoid intrateam free-riding. Importantly, endogenous communication policies reshape competitive dynamics, with private disclosure of efforts serving as a strategic equalizer for weaker teams.