Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/26149 
Year of Publication: 
2007
Series/Report no.: 
CESifo Working Paper No. 2104
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Using a Cournot oligopoly model with an endogenous number of firms and evasion of indirect taxes, this paper shows that more intense competition may have the negative side-effect of eroding tax revenues by increasing tax evasion. This will be the case if market entry costs decrease. A similar result will hold if marginal production costs fall and demand is either weakly concave or convex and inelastic. The desirable result of more competition, less evasion and higher tax revenues will be obtained if (a) marginal production costs fall and demand is convex and elastic or (b) the demand elasticity increases.
JEL: 
H25
H26
L13
L51
Document Type: 
Working Paper
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