- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
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.
This paper discusses the possibility of having an enhanced consumers’ surplus as well as social surplus by means of a suitably designed tariff policy. We have raised this issue in a framework of asymmetric duopoly where the foreign firm possesses the superior production technology compared to the technology of the home firm, and whenever profitable the firms make a licensing agreement under which the foreign firm licenses its superior technology to the home firm. It is assumed that the foreign firm designs an optimal two-part tariff licensing contract comprising of a fixed fee and a royalty. However, under the optimal contract one component can be zero. In the absence of any intervention by the local government, the optimal contract consists of only royalty and zero fixed fee, but under prohibitive tariff the optimal contract will have only fee and no royalty. We have shown that there are situations when tariffs are positive and non-prohibitive for which both fee and royalty can be positive. Thus our paper highlights the fact that a tariff can be an effective instrument to influence the licensing strategy of the foreign firm. In particular, the government can implement fee licensing contract by means of its appropriate choice of tariffs. In the paper we have considered two alternative objectives of the local government, namely, consumers’ welfare maximization and social welfare maximization. Consumers’ welfare is measured by consumers’ surplus, and social welfare consists of consumers’ surplus, domestic firm's profit and government's tariff revenue. We have also examined whether there is any conflict between these two objectives as far as the choice of an optimal tariff is concerned. When consumers’ welfare maximization is the objective of the local government, we have noted the trade-off between a positive royalty and a positive tariff. Our paper shows that the local government can influence the licensing strategy of the foreign firm by means of manipulating the tariff rate and hence optimally choose a tariff that maximizes consumers’ welfare. In particular, we have shown that if the size of the innovation is small, consumers’ welfare maximizing tariff will be zero and this will induce licensing with a royalty rate equal to the amount of cost saving. On the other hand, when the size of the innovation is large, an appropriate tariff rate will induce a licensing agreement with a fee only. This will lead to a higher consumers’ surplus compared to no licensing situation and prohibitive tariff regime. In our framework when a tariff is chosen to maximize consumers’ welfare, this also results in a higher social welfare because the local firm gains from its higher reservation payoff under the tariff, and the local government also acquires a part of the foreign firm's profit in the form of tariff revenue.