Taxation under Oligopoly in a General Equilibrium Setting
No E2015/15, Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section
Taxation under oligopoly is analysed in a general equilibrium setting where the firms are large relative to the size of the economy and maximise the utility of their shareholders. It turns out that the model is an aggregative game, which simplifies the comparative statics for the effects of taxation. This novel analysis of taxation leads to a number of counterintuitive results that challenge conventional wisdom in microeconomics. A lump-sum tax may increase the price of the oligopolistic good and decrease welfare whereas a profits tax may decrease the price of the oligopolistic good and increase welfare. An ad valorem tax may decrease the price of the oligopolistic good and increase welfare. Furthermore, in line with conventional wisdom, total tax revenue is always higher with an ad valorem tax than with a specific tax that leads to the same price for the oligopolistic good.
Keywords: Oligopoly; General Equilibrium; Aggregative Games; Ad Valorem Taxes; Specific Taxes; Profits Taxes; Lump-Sum Taxes (search for similar items in EconPapers)
JEL-codes: C72 D21 D43 D51 H22 H25 L13 L21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cdf:wpaper:2015/15
Access Statistics for this paper
More papers in Cardiff Economics Working Papers from Cardiff University, Cardiff Business School, Economics Section Contact information at EDIRC.
Series data maintained by Yongdeng Xu ().