Tariff Induced Fee Licensing and Consumers’ Welfare

Kabiraj, Tarun (2012): Tariff Induced Fee Licensing and Consumers’ Welfare.

Abstract

In a Cournot duopoly with one foreign firm and one domestic firm we show that a tariff on foreign products can be an effective instrument to influence the licensing strategy of the foreign firm. Under free trade technology transfer occurs with a royalty contract, but a suitably designed tariff rate can induce the foreign firm transfer its superior technology to the domestic firm under the fee contract where consumers’ welfare is maximized and social welfare is larger. Such a policy appears to be catchy from the viewpoint of a political party in power

• Item Type: MPRA Paper
• Language: English
• Keywords: Tariffs; Fee licensing; Royalty licensing; Consumers’ welfare
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets

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