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Tariff induced licensing contracts,consumers’ surplus and welfare |
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| Institution: | 1. Department of Economics, National Taipei University, New Taipei, Taiwan;2. Research Center for Humanities and Social Sciences, Academia Sinica, Taipei, Taiwan;3. Department of Public Finance, National Chengchi University, Taipei, Taiwan;4. Faculty of Business and Economics, University of Hong Kong, Hong Kong;1. University of Wisconsin-Milwaukee, Milwaukee, WI, USA;2. School of International Trade and Economics, University of International Business and Economics, China;3. Hanqing Advanced Institute of Economics and Finance, Antitrust and Competition Policy Center, School of Economics, Renmin University of China, 59 Zhongguancun Street, Beijing 100872, China |
| Abstract: | We construct a duopolistic trade model with technology transfer and consider two-part tariff licensing contracts. We show that a tariff on foreign products can influence the licensing strategy of the foreign firm. There is a trade-off between a tariff and a royalty license in affecting the product price. We show in particular that a tariff can be chosen so as to induce fee licensing and maximize both consumers’ surplus and domestic welfare. This resolves the so-called conflict between these two objectives in respect of the choice of a tariff. The paper provides a number of testable hypothesis. |
| Keywords: | Two-part tariff contracts Fee licensing Royalty licensing Consumers’ surplus Welfare Tariff protection |
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