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What determines the technology adoption of firms under optimal tax?

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  • She, Chih-Min

Abstract

Technology adoption in a Cournot duopoly under optimal tax is studied. A benchmark model of laissez-faire economy shows that the chance of adoption increases in market size, a result ubiquitous in the paper. With optimal subsidy, adoption is more likely than in the laissez-faire economy. The chance is even higher if firms make adoption decisions before the government sets the tax rate. Negative externality of the commodity lowers the chance of adoption under optimal tax, but not below that in the laissez-faire economy unless the government moves first and the market is too small. However, if the new technology is clean, the chance of adoption can be significantly improved, even when the externality is only partially remedied. Moreover, a clean technology is more likely adopted than a technology without externality issue when the market is sufficiently large.

Suggested Citation

  • She, Chih-Min, 2015. "What determines the technology adoption of firms under optimal tax?," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 274-289.
    • Handle: RePEc:eee:reveco:v:37:y:2015:i:c:p:274-289
    DOI: 10.1016/j.iref.2014.12.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Technology adoption; Cournot duopoly; Optimal taxation; Externality;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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