Size effect, neighbour effect and peripheral effect in cross-border tax games

Xin Liu

No 2014-19, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper analyses a game theoretic model of tax competition in a system where tax authorities are revenue optimisers and countries are differentiated by size. The model accommodates more than two countries. In equilibrium, larger countries set higher tax rates non-cooperatively. By applying the Hotelling linear model, this paper gives examples where the size effect, neighbourhood effect, and peripheral effect coexist and push up the tax rate in equilibrium.

Keywords: tax competition; cross-border shopping; Nash equilibrium; peripheral effects (search for similar items in EconPapers)
JEL-codes: H20 H71 H73 R51 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-gth, nep-pbe, nep-pub and nep-ure
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https://www.econstor.eu/bitstream/10419/96487/1/784949565.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201419

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