Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315693 
Year of Publication: 
2024
Citation: 
[Journal:] Review of Managerial Science [ISSN:] 1863-6691 [Volume:] 18 [Issue:] 12 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2024 [Pages:] 3487-3514
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
Incorporating a progressive income tax into an economic decision problem raises the question whether this tax does not create arbitrage opportunities. We investigate this problem in a riskless (multi-period) economy. With a convex tax function we identify a particular kind of arbitrage (called bounded arbitrage): In this case the gain achievable through arbitrage trade is limited and cannot reach infinity.We are able to give a complete characterisation based on prizes of the traded assets as to whether bounded as well as unbounded arbitrage opportunities will exist.
Subjects: 
No-arbitrage with taxation
Fundamental theorem of asset pricing
Non-constant tax rates
Application of convex optimization problems
JEL: 
C61
E62
G12
H24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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