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Maximum-revenue versus Optimum-welfare Export Taxes: a Delegation Game

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  • Roger Clarke
  • David R. Collie

Abstract

In the Eaton and Grossman (1986 ) Bertrand duopoly model of strategic export taxes, both countries may be better off if they both delegate to policymakers who maximize tax revenue rather than welfare. However, both countries delegating to policymakers who maximize tax revenue is not a Nash equilibrium unless the degree of product substitutability is sufficiently high. For a wide range of values for the degree of product substitutability, the game is a prisoner's dilemma where both countries are better off delegating to policymakers who maximize tax revenue but both will delegate to policymakers who maximize welfare in the Nash equilibrium. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 16 (2008)
Issue (Month): 5 (November)
Pages: 919-929

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Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:919-929

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References

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  1. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 101(2), pages 383-406, May.
  2. Roger Clarke & David Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 36(3), pages 658-673, August.
  3. Yilmaz, Kamil, 1999. "Optimal export taxes in a multicountry framework," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 439-465, December.
  4. Roger Clarke & David R . Collie, 2006. "Optimum-Welfare And Maximum-Revenue Tariffs Under Bertrand Duopoly," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 53(3), pages 398-408, 07.
  5. Toru Kikuchi, 1998. "Strategic Export Policy in a Differentiated Duopoly: A Note," Open Economies Review, Springer, Springer, vol. 9(4), pages 315-325, October.
  6. Clarke, Roger & Collie, David R., 2006. "Maximum-Revenue versus Optimum-Welfare Export Taxes," Cardiff Economics Working Papers E2006/22, Cardiff University, Cardiff Business School, Economics Section.
  7. David Collie, 1997. "Delegation and Strategic Trade Policy," International Economic Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 11(3), pages 35-46.
  8. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, Elsevier, vol. 45(1), pages 79-84, May.
  9. David Collie & Roger Clarke, 2006. "Export Taxes under Bertrand Duopoly," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-8.
  10. Collie, David, 1991. "Optimum Welfare and Maximum Revenue Tariffs under Oligopoly," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 38(4), pages 398-401, November.
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Cited by:
  1. Wang, Leonard F.S. & Lee, Jen-Yao, 2012. "Domestic entry, optimum-welfare and maximum-revenue tariffs," Research in Economics, Elsevier, Elsevier, vol. 66(1), pages 106-109.
  2. Vijay Mohan & Bharat Hazari, 2012. "Tax Policy When Countries Compete for Third Market Exports," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 17(5), pages 708-728, December.
  3. Leonard Wang & Jen-yao Lee & Chin-shu Huang, 2012. "Maximum-Revenue and Optimum-Welfare Tariffs in International Mixed Duopoly: Does the Order of Firms’ Move Matter?," Journal of Industry, Competition and Trade, Springer, Springer, vol. 12(3), pages 273-283, September.

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