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Taxation and Welfare in an Oligopoly with Strategic Commitment

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  • Besley, Timothy
  • Suzumura, Kotaro
Abstract
This paper establishes comparative statics results for an oligopoly model with strategic commitment. Firms compete in two stages. In the first stage, firms decide on strategic cost-reducing R&D investment, whereas they choose output in the second stage. Taking an excise tax/subsidy as a shift parameter in the second stage game, the short-run as well as long-run effects on output, cost-reducing R&D investment, and second-best welfare will be examined. The crucial role played by the strategic substitutability of outputs as well as cost-reducing R&D investments is clarified, and a variant of the Le Chatelier-Samuelson principle in the authors' game-theoretic model is obtained. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Besley, Timothy & Suzumura, Kotaro, 1992. "Taxation and Welfare in an Oligopoly with Strategic Commitment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 413-431, May.
    • Handle: RePEc:ier:iecrev:v:33:y:1992:i:2:p:413-31
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    Cited by:

    1. Lambertini, Luca, 1997. "Optimal Fiscal Regime in a Spatial Duopoly," Journal of Urban Economics, Elsevier, vol. 41(3), pages 407-420, May.
    2. Gilbert E. Metcalf & Don Fullerton, 2002. "The Distribution of Tax Burdens: An Introduction," NBER Working Papers 8978, National Bureau of Economic Research, Inc.
    3. Chin W. Yang & Hui Wen Cheng & Ching Wen Chi & Bwo-Nung Huang, 2016. "A Tax Can Increase Profit of a Monopolist or a Monopoly-like Firm: A Fiction or Distinct Possibility?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 216(1), pages 39-60, March.
    4. Bernard Lebrun, 2015. "Revenue-superior variants of the second-price auction," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(2), pages 245-275, June.
    5. Long, Ngo Van & Soubeyran, Antoine, 2001. "Cost Manipulation Games in Oligopoly, with Costs of Manipulating," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 505-533, May.
    6. Karbowski Adam & Prokop Jacek, 2020. "The Impact of Patents and R&D Cooperation on R&D Investments in a Differentiated Goods Industry," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 122-133, June.
    7. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421, Elsevier.
    8. Don Fullerton & Gilbert Metcalf, 2002. "The Distribution of Tax Burdens," Discussion Papers Series, Department of Economics, Tufts University 0201, Department of Economics, Tufts University.
    9. Kaz Miyagiwa & Yuka Ohno, 2009. "Multinationals, Tax Holidays, And Technology Transfer," The Japanese Economic Review, Japanese Economic Association, vol. 60(1), pages 82-96, March.
    10. Friedel Bolle, 2011. "Over- and under-investment according to different benchmarks," Journal of Economics, Springer, vol. 104(3), pages 219-238, November.
    11. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
    12. Bruce A. Blonigen & Yuka Ohno, 2019. "Endogenous Protection, Foreign Direct Investment and Protection-building Trade," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 6, pages 205-233, World Scientific Publishing Co. Pte. Ltd..
    13. Susumu Cato & Toshihiro Matsumura, 2013. "Long-Run Effects of Tax Policies in a Mixed Market," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(2), pages 215-240, June.

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