Taxation and Welfare in an Oligopoly with Strategic Commitment
AbstractThis 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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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 33 (1992)
Issue (Month): 2 (May)
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- Besley, T. & Suzumura, K., 1989. "Taxation And Welfare In An Oligopoly With Stategic Commitment," Papers 52, Princeton, Woodrow Wilson School - Discussion Paper.
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