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This paper sets out a duopolistic model to examine the price and welfare equivalence of tariffs and quotas, given the quota rent is equal to the tariff revenue. It shows that the domestic welfare ranking of the two trade policies crucially depends on the relative costs of the domestic and foreign firms; when the domestic firm's relative costs are lower than those of the foreign firm, a quota regime generally leads to a higher welfare level than that of an equivalent tariff regime. This finding contrasts sharply with the conclusions of Dasgupta and Stiglitz (1977), where it was found that a tariff regime always generates higher domestic welfare.

This paper studies the patent licensing decision when firms can endogenously choose their locations. If the insider patentee is the location leader, the royalty is not necessarily the best method of licensing. No licensing can be the best method for an insider patentee with a sufficiently high degree of innovation, but fixed-fee is always the worst. However, if the non-innovating firm is the location leader, the royalty licensing is always the best method; moreover, the fixed-fee licensing (no licensing) is the second best method if the degree of innovation is relatively small (sufficiently large).