Tariff induced licensing contracts, consumers’ surplus and welfare

Abhishek Kabiraj and Tarun Kabiraj

Economic Modelling, 2017, vol. 60, issue C, 439-447

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 (search for similar items in EconPapers)
JEL-codes: D43 F13 L13 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:60:y:2017:i:c:p:439-447

DOI: 10.1016/j.econmod.2016.11.001

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