Monetizing innovations in conflicts

Abstract: A group of players is about to engage in a conflict. A third party can improve the position of any player by providing an ability-enhancing innovation, and she seeks to maximize the revenue she extracts. The innovation is an excludable technology, and there are negative externalities amongst the players. I study the general properties of the optimal mechanism and apply it to several popular models. The main application considers a Tullock contest in which the technology reduces the cost of effort.