Voluntary export restraints and strategic technology transfers

Abstract

This paper investigates the effects of voluntary export restraints (VERs) in the presence of potential entrants and technology transfers. It builds a model of a licensing game in a Cournot oligopoly market, and examines conditions under which VERs induce restrained foreign firms to transfer technologies to potential suppliers. I show that a VER can decrease the profit and output of the domestic incumbent by perturbing the no-licensing equilibrium reached under free trade and inducing the market to move to a licensing equilibrium.