Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107335
Authors: 
Dang, Tri Vi
Morath, Florian
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5157
Abstract: 
This paper analyzes the effects of taxation on information acquisition and bilateral trade in decentralized markets. We show that a profit tax and a transaction tax have opposite implications for equilibrium outcome in bargaining. A marginal increase of a transaction tax increases the incentive to produce private information which creates adverse selection and reduces the probability of trade. In contrast, a marginal increase of a profit tax reduces the incentive to produce information and increases the probability of trade. In markets where there are gains from trade and private information acquisition creates endogenous lemons problems a profit tax dominates a transaction tax.
Subjects: 
bargaining
information acquisition
taxation
financial transaction tax
funding markets
JEL: 
C78
D82
D83
G18
H20
Document Type: 
Working Paper

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