Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor

Kim, Seung-Leul and Lee, Sang-Ho (2021): Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor.

Abstract

This study considers eco-technology licensing strategy by a foreign innovator that competes with a polluting domestic firm in the home country. We examine and compare the two-part licensing contracts with and without non-negative constraints on the royalty or a fixed fee. We find that the licensor may choose either negative royalty or negative fixed fee, depending on the levels of emissions tax and tariff. We then examine the government’s optimal tariff policies under the emissions tax and demonstrate that allowing a non-restrictive two-part licensing contract is better for domestic welfare than a restrictive licensing contract. We also reveal that the tariffs under the two-part licensing have a negative relationship with emissions taxes, but the tariff with non-restrictive licensing is higher than that with restrictive licensing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Eco-technology; tariff policies; emissions tax; non-restrictive two-part licensing; foreign innovated firm
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D45 - Rationing ; Licensing; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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