Competition for Firms in an Oligopolistic Industry: Do Firms or Countries Have to Pay?

Andreas Haufler and Ian Wooton ()

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: We set up a model of generalised oligopoly where two countries of different size compete for an exogenous, but variable, number of identical firms. The model combines a desire by national governments to attract internationally mobile firms with the existence of location rents that arise even in a symmetric equilibrium where firms are dispersed. As economic integration proceeds, equilibrium taxes decline, switching from positive to negative levels, and then rise as trade costs fall even further. A range of trade costs is identified where economic integration raises the welfare of the small country, but lowers welfare in the large country.

Keywords: tax and subsidy competition; oligopolistic markets (search for similar items in EconPapers)
JEL-codes: F15 H25 H73 (search for similar items in EconPapers)
Date: 2007-03
New Economics Papers: this item is included in nep-ind, nep-int and nep-pbe
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Competition for Firms in an Oligopolistic Industry: Do Firms or Countries Have to Pay? (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:1399

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