International joint venture and welfare-improving tariff-tax reforms

- We study the welfare effects of two tariff-tax reforms in the presence of an IJV.
- Profit margins and equity shares of IJV impact the welfare in a point-by-point case.
- A point-by-point reform may increase welfare based on the extent of share threshold.
- The world-price-fixing reform cannot impact the joint venture's profit.
- The world-price-fixing reform reduces producer surplus, consumer surplus and welfare.

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.