Licensing a cost-reducing technology in contests

Prior to a symmetric contest, a third party can improve the position of any contestant by equipping her with a technology that reduces the cost of effort. The third party needs to choose a subset of contestants to whom it will sell the technology. I derive the third party’s optimal policy given 2-player and 3-player contests, and also given contests with an arbitrary number of players, provided that the technology is sufficiently effective. The optimal policy is discriminatory. Discrimination becomes more severe as the quality of the technology increases, and it also becomes more severe as the contest-size increases.

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