Strategic Tax Competition: An Experimental Study
AbstractWe study the effect of a payoff advantage, symmetric payoff change and policymakers interaction on choices in tax competition games. To examine the first two effects a standard symmetric game is respectively compared to an asymmetric game where one player has a payoff advantage and to another symmetric game where both players have symmetrically higher payoffs. When payoffs are asymmetric, we find that if policymakers have a payoff disadvantage they are more likely to compete. Instead policymakers with a payoff advantage are keener to tax above equilibrium. Our results also show there is a payoff size effect where choices are brought closer to equilibrium when payoffs are symmetrically higher. These two effects are further studied when players interact repeatedly. With repeated interaction cooperation is sustained only in the symmetric games but fail to materialise in the asymmetric game. A regression analysis of our results reveals further differences between these games.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Centre for Behavioural Business Research in its series ICBBR Working Papers with number 5.
Date of creation: 08 Oct 2009
Date of revision:
Contact details of provider:
Postal: Jubilee Campus, Nottingham NG2 8BB
Phone: +44-115-846 66 02
Fax: +44-115-846 66 67
Web page: http://www.nottingham.ac.uk/business/
More information through EDIRC
Tax Competition; Experimental Economics; Asymmetry.;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-17 (All new papers)
- NEP-EXP-2009-10-17 (Experimental Economics)
- NEP-GTH-2009-10-17 (Game Theory)
- NEP-MIC-2009-10-17 (Microeconomics)
- NEP-PBE-2009-10-17 (Public Economics)
- NEP-URE-2009-10-17 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Russell Cooper & Douglas V. DeJong & Thomas W. Ross, 1992.
"Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games,"
0036, Boston University - Industry Studies Programme.
- Cooper, Russell & DeJong, Douglas V. & Forsythe, Robert & Ross, Thomas W., 1996. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Games and Economic Behavior, Elsevier, vol. 12(2), pages 187-218, February.
- Cooper, R. & DeJong, D.W. & Ross, T.W., 1992. "Cooperation without Reputation: Experimental Evidence from Prisoner's Dilemma Games," Papers 36, Boston University - Industry Studies Programme.
- Martin Beckenkamp & Heike Hennig-Schmidt & Frank P. Maier-Rigaud, 2007. "Cooperation in Symmetric and Asymmetric Prisoner's Dilemma Games," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2006_25, Max Planck Institute for Research on Collective Goods.
- Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June.
- Zodrow, George R, 2003. "Tax Competition and Tax Coordination in the European Union," International Tax and Public Finance, Springer, vol. 10(6), pages 651-71, November.
- Ben Lockwood & Michael B. Devereux & Michela Redoano, 2003. "Capital Account Liberalization and Corporate Taxes," IMF Working Papers 03/180, International Monetary Fund.
- McCaffery, Edward J. & Baron, Jonathan, 2004. "Framing and taxation: Evaluation of tax policies involving household composition," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 679-705, December.
- Vernon L. Smith, 1962.
"An Experimental Study of Competitive Market Behavior,"
Journal of Political Economy,
University of Chicago Press, vol. 70, pages 111.
- Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322.
- Wildasin, D.E., 1987.
"Nash equilibria in models of fiscal competition,"
CORE Discussion Papers
1987020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
- Cardarelli, R. & Taugourdeau, E. & Vidal, J.-P., 1999.
"A Repeated Interactions Model of Tax Competition,"
99a34, Universite Aix-Marseille III.
- Cardarelli, R. & Taugourdeau, E. & Vidal, J.-P., 1999. "A Repeated Interactions Model of Tax Competition," Papiers d'Economie MathÃÂ©matique et Applications 1999.73, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002.
"Do Countries Compete Over Corporate Tax Rates?,"
The Warwick Economics Research Paper Series (TWERPS)
642, University of Warwick, Department of Economics.
- Dirk Engelmann & Hans-Theo Normann, 2003.
"An Experimental Test of Strategic Trade Policy,"
CERGE-EI Working Papers
wp212, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
- Alm, James & McClelland, Gary H. & Schulze, William D., 1992. "Why do people pay taxes?," Journal of Public Economics, Elsevier, vol. 48(1), pages 21-38, June.
- Klaus Abbink & Heike Hennig-Schmidt, 2006.
"Neutral versus loaded instructions in a bribery experiment,"
Springer, vol. 9(2), pages 103-121, June.
- Klaus Abbink & Heike Hennig-Schmidt, 2002. "Neutral versus Loaded Instructions in a Bribery Experiment," Bonn Econ Discussion Papers bgse23_2002, University of Bonn, Germany.
- Andereoni, J., 1988. "Why Free Ride? Strategies And Learning In Public Goods Experiments," Working papers 375, Wisconsin Madison - Social Systems.
- Bucovetsky, S., 1991. "Asymmetric tax competition," Journal of Urban Economics, Elsevier, vol. 30(2), pages 167-181, September.
- Bretschger, Lucas & Hettich, Frank, 2002.
"Globalisation, capital mobility and tax competition: theory and evidence for OECD countries,"
European Journal of Political Economy,
Elsevier, vol. 18(4), pages 695-716, November.
- Bretschger, Lucas & Hettich, Frank, 2000. "Globalisation, capital mobility and tax competition: Theory and evidence for OECD countries," Wirtschaftswissenschaftliche Diskussionspapiere 07/2000, Ernst Moritz Arndt University of Greifswald, Faculty of Law and Economics.
- Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
- Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laure Cabantous).
If references are entirely missing, you can add them using this form.