Optimal taxation in a common resource oligopoly game

Michele Bisceglia ()
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Michele Bisceglia: Università degli Studi di Bergamo

Journal of Economics, 2020, vol. 129, issue 1, No 1, 31 pages

Abstract: Abstract In this paper, we study the optimal tax policy in a differential oligopoly game where the competing firms share the access to a productive renewable resource. We show that, in a Feedback Nash Equilibrium of the game, a linear Markov tax, imposed on the output, and specified as an affine function of the available resource stock, leads the competing firms to produce the socially optimal quantities over time, thus overcoming the dynamic interplay between the tragedy of the commons and the firms’ market power. The optimal tax turns out to be independent from the resource stock in a monopoly, and it cannot be defined in a duopoly.

Keywords: Tragedy of the commons; Renewable resource oligopoly; Differential game; Optimal tax policy; Linear Markov tax (search for similar items in EconPapers)
JEL-codes: C61 C72 C73 D21 D23 D43 D62 H21 H23 Q20 Q28 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:129:y:2020:i:1:d:10.1007_s00712-019-00662-y

DOI: 10.1007/s00712-019-00662-y

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