Endogenous strength in conflicts

In this paper we study a two stage contest where the strength of players in the second stage depends on the result of the contest in the first stage. We show that this contest displays properties that are not present in one shot contests. Non-symmetric players make different efforts in the first stage and rent dissipation in the first period may be large. We study the conditions under which the discouragement effect holds. In addition, new issues emerge like the evolution of the strengths and the shares of the prize during the game.