Tariff induced licensing contracts, consumers’ surplus and welfare
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.
Kabiraj, Abhishek and Kabiraj, Tarun, "Tariff induced licensing contracts, consumers’ surplus and welfare" (2017). Journal Articles. 2799.