This paper establishes a cross-industry pollution externality model. To explain a benevolent government, it may be possible to tax part of the welfare gains and use the revenue to compensate the affected polluted industry for the damage cost, thereby improving welfare. We show that the social welfare under emission tax with production subsidy is higher than the results of emission tax without production subsidy. The welfare of the polluted sector under emissions trading will be lower than the results of unbalanced budget environmental policy with subsidy. The welfare of the polluted labor union under lobby for compensation will be higher than the results of environmental policy with subsidy if the pollution damage and the weight on political contributions are sufficiently high.

Past research indicates that a licensor tends to adopt the fixed fee, in order to obtain higher profit rather than secure royalty when he participates in zero production in the market. This study instead finds that the patentee’s optimum strategy may vary. In addition to the fixed-fee strategy, royalty or mixed licensing, or fixed fee plus royalty may be potential choices for the patentee as well which is depend on the market scale, incidence of market scale, and magnitude of cost-saving. The patentee may choose to only authorize a type of high market size based on self-interested motives. The technology licensing market is not sustainable.