Disintermediation and the internet

Abstract

This paper examines the welfare effects of two tariff-tax reforms—point-by-point and world-price-fixing—under an asymmetric duopoly in the presence of an international joint venture (IJV). If the host government implements a point-by-point reform, the welfare effect is highly relevant to the domestic rival's profit margin and the equity share of the host partner in the IJV. Welfare may increase based upon the extent of share threshold. If the government implements a world-price-fixing reform, together with profit-shifting effect, the reform will reduce welfare in the host country. Furthermore, an increase in the domestic rival's profit margin strengthens welfare loss.