On Taxation Policy in Strategic Bilateral Exchange: A review

Gagnie Pascal Yebarth

No 2025-34, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: This paper provides a comprehensive review of the literature on tax policy within the framework of strategic market games (SMG). We refer to a simple prototype of SMGs called bilateral oligopoly models. The review reveals that the effects and effectiveness of redistributive tax policies depend on the preferences of individuals who behave strategically in trade. A crucial element of this analysis is the influence of strategic interactions on the price formation mechanism and, therefore, on the optimality of a tax-and-transfer policy to improve allocation efficiency. Then, we connect our findings to broader discussions in the literature, specifically regarding the effects of taxation on general and partial equilibrium (tax incidence: ad valorem versus per unit taxes; optimal taxation and market power; market imperfections, strategic interactions, and taxation). Although the comparison remains conceptually complicated, we show the complementarity of the diverse literature.

Keywords: Imperfect competition; Market power; Strategic market game; Tax policy. (search for similar items in EconPapers)
JEL-codes: C72 D43 D51 H22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2025
New Economics Papers: this item is included in nep-gth
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