Competitive wages and tax evasion in a Cournot duopoly

Domenico Buccella (), Luciano Fanti and Luca Gori ()
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Domenico Buccella: Kozminski University

Theory and Decision, 2024, vol. 97, issue 3, No 8, 585-594

Abstract: Abstract In a Cournot duopoly with indirect tax evasion, this paper counter-intuitively shows that, in the presence of positive competitive wages, a higher indirect taxation may increase expected profits. This result is likely to occur if the market size (or alternatively, if the cost pressure exerted by wages) is adequately large and the detection probability is not too high, and it is equivalent irrespective of firms optimally choosing either the tax base to disclose to the tax authority or the amount of evasion tout-court.

Keywords: Tax Evasion; Sales Tax; Cournot duopoly; Competitive wages (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11238-024-09987-7

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