Transferable licenses versus nontransferable licenses: What is the difference?

This paper questions the presumption that transferable licenses are worth m ore and result in higher welfare. We show that the price of a transferable license may be lower than that of its nontransferable counterpart if the un derlying quota is not very severe. However, transferability is preferable t o nontransferability if consumer surplus and license revenue have equal wei ght in the welfare function. We also examine whether licenses will be monop olized by domestic producers with market power. The models have implication s for several issues, including the design of pollution permits and how to maximize revenue from ticket sales.