Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/174104
Authors: 
Collie, David R.
Year of Publication: 
2015
Series/Report no.: 
Cardiff Economics Working Papers E2015/15
Abstract: 
Taxation under oligopoly is analysed in a general equilibrium setting where the firms are large relative to the size of the economy and maximise the utility of their shareholders. It turns out that the model is an aggregative game, which simplifies the comparative statics for the effects of taxation. This novel analysis of taxation leads to a number of counterintuitive results that challenge conventional wisdom in microeconomics. A lump-sum tax may increase the price of the oligopolistic good and decrease welfare whereas a profits tax may decrease the price of the oligopolistic good and increase welfare. An ad valorem tax may decrease the price of the oligopolistic good and increase welfare. Furthermore, in line with conventional wisdom, total tax revenue is always higher with an ad valorem tax than with a specific tax that leads to the same price for the oligopolistic good.
Subjects: 
Oligopoly
General Equilibrium
Aggregative Games
Ad Valorem Taxes
Specific Taxes
Profits Taxes
Lump-Sum Taxes
JEL: 
C72
D21
D43
D51
H22
H25
L13
L21
Document Type: 
Working Paper

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