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

Seung-Leul Kim and Sang-Ho Lee

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Eco-technology; tariff policies; emissions tax; non-restrictive two-part licensing; foreign innovated firm (search for similar items in EconPapers)
JEL-codes: D45 H23 L13 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-cta, nep-ene, nep-env and nep-int
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