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The licensing of eco-technology under emission taxation: Fixed fee vs. auction

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  • Kim, Seung-Leul
  • Lee, Sang-Ho

Abstract

This paper investigates the effect of emission taxation on outside innovator's licensing strategies for eco-technology and its welfare consequences when duopolistic polluting firms have different production costs and purchase licenses for pollution abatement goods. In the presence of an emission tax, we compare the two types of licensing contract, fixed fee and auction, and show that the preference on licensing strategy depends not only upon the level of the emission tax but also on the production cost gap. Specifically, non-exclusive licensing is preferred to exclusive licensing when the emission tax or cost gap is small, while exclusive auction (fixed fee) licensing is preferred when the cost gap is intermediate (large). We also analyze some important welfare issues and discuss public policies on emission taxation and licensing regulation.

Suggested Citation

  • Kim, Seung-Leul & Lee, Sang-Ho, 2016. "The licensing of eco-technology under emission taxation: Fixed fee vs. auction," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 343-357.
    • Handle: RePEc:eee:reveco:v:45:y:2016:i:c:p:343-357
    DOI: 10.1016/j.iref.2016.07.004
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    References listed on IDEAS

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    Cited by:

    1. Yan, Yan & Li, Yi, 2023. "Regulation, external R&D, and strategic diffusion of pollution abatement technology," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 731-744.
    2. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    3. Roberta Sestini & Donatella Pugliese, 2021. "To buy or to do it yourself? Pollution policy and environmental goods in developing countries," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(1), pages 105-135, March.
    4. Yan, Qingyou & Yang, Le, 2018. "Optimal licensing in a differentiated Bertrand market under uncertain R&D outcomes and technology spillover," Economic Modelling, Elsevier, vol. 68(C), pages 117-126.
    5. Wang, Qianqian & Sun, Xinmeng & Xiong, Haoyang & Wang, Qi & Zhang, Bing, 2024. "Environmental taxes, environmental outsourcing, and pollution abatement: Evidence from Chinese industrial sewage discharge enterprises," Energy Economics, Elsevier, vol. 133(C).
    6. Xiang, Xiaojian & Liu, Chuanjiang & Yang, Mian, 2022. "Who is financing corporate green innovation?," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 321-337.

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    More about this item

    Keywords

    Eco-technology; Cost gap; Auctioning licensing; Fixed-fee licensing; Royalty licensing;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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