Do Royalties: "Have a Disincentive Effect on Production"?

Robert Weston Fraser and Hild Rygnestad
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Hild Rygnestad: University of Western Australia

Economic Analysis and Policy (EAP), 2000, vol. 30, issue 1, pages 91-97

Abstract: This paper analyses the impact of royalties in the context of a bilateral monopoly bargaining process. It is shown that the bilateral monopoly model is characterised by two distinct forms which are distinguished by the shape of the sellers marginal cost function. It is also shown that the output effect of introduction of royalties is ambiguous bot because of the role of the bargaining process and because of these two distinct forms of bilateral monopoly. Therefore, it is argued that no unambiguous conclusion can be reached regarding the impact of imposing royalties on the level of production.

Date: 2000

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