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Corporation Tax Asymmetries and Cartel Unity

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Author Info
Pierre-Pascal Gendron ()
Abstract

This paper examines the impact of changing the extent to which tax losses are refunded to firms in a model of imperfect competition. It proposes a particular collusive equilibrium in a repeated oligopoly with homogeneous quantity-setting firms. The industry sustains tacit collusion by using credible and severe punishments of deviations. The analysis of the most collusive equilibrium with losses indicates that a tax policy which increases refunds reduces output, increases market price, and therefore strengthens tacit collusion. In addition, the policy increases government revenue. An increase in the corporation tax rate has similar effects. Copyright Kluwer Academic Publishers 2001

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File URL: http://hdl.handle.net/10.1023/A:1012876925185
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 8 (2001)
Issue (Month): 5 (November)
Pages: 659-674
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:kap:itaxpf:v:8:y:2001:i:5:p:659-674

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Web page: http://www.springerlink.com/link.asp?id=102915

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Related research
Keywords: tax asymmetries; collusive equilibrium; losses; punishment;

References listed on IDEAS
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  1. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, vol. 39(1), pages 251-269, June. [Downloadable!] (restricted)
  2. Mukesh Eswaran, 1997. "Cartel Unity over the Business Cycle," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 644-72, August. [Downloadable!] (restricted)
  3. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March. [Downloadable!] (restricted)
  4. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June. [Downloadable!] (restricted)
  5. Auerbach, Alan J, 1986. "The Dynamic Effects of Tax Law Asymmetries," Review of Economic Studies, Blackwell Publishing, vol. 53(2), pages 205-25, April. [Downloadable!] (restricted)
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  6. Davidson, Carl & Martin, Lawrence, 1991. "Tax incidence in a simple general equilibrium model with collusion and entry," Journal of Public Economics, Elsevier, vol. 45(2), pages 161-190, July. [Downloadable!] (restricted)
  7. Davidson, Carl & Martin, Lawrence W, 1985. "General Equilibrium Tax Incidence under Imperfect Competition: A Quantity-setting Supergame Analysis," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1212-23, December. [Downloadable!] (restricted)
  8. Pierre-Pascal Gendron, 1996. "Corporation Tax Asymmetries: An Oligopolistic Supergame Analysis," Working Papers ecpap-96-04, University of Toronto, Department of Economics. [Downloadable!]
  9. Lambson, Val Eugene, 1987. "Optimal Penal Codes in Price-Setting Supergames with Capacity Constraints," Review of Economic Studies, Blackwell Publishing, vol. 54(3), pages 385-97, July. [Downloadable!] (restricted)
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This page was last updated on 2009-11-25.

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