Output taxation by a revenue-raising government under signaling
AbstractIn this paper the behavior of a tax-collecting government (a tax office) when imposing a quantity-tax to firms is analyzed along a two-period signaling model. Each taxpayer privately knows its technological attributes, while third parties—the tax office among them—have only a prior belief about this fact, so firms can be tempted to behave opportunistically. In monopoly, signaling is always costly in terms of output deviation and the tax office reacts by setting, a smaller tax in (asymmetric information) period 1 than it would under symmetric information. In oligopoly, signaling can be either costly or costless. In the former case, the tax imposed by the tax office to each firm is below that imposed under symmetric information, while it is equal in the latter case. Besides, fiscal revenue under signaling is unambiguously lower than under symmetric information, even when tax size is the same in both contexts
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Bibliographic InfoPaper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2011/03.
Date of creation: 2011
Date of revision:
Output-tax; tax office; asymmetric information; signaling;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-02-01 (Accounting & Auditing)
- NEP-ALL-2012-02-01 (All new papers)
- NEP-CTA-2012-02-01 (Contract Theory & Applications)
- NEP-PBE-2012-02-01 (Public Economics)
- NEP-PUB-2012-02-01 (Public Finance)
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.:
- Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
- Kim, Jae-Cheol & Chang, Ki-Bok, 1993. "An Optimal Tax/Subsidy for Output and Pollution Control under Asymmetric Information in Oligopoly Markets," Journal of Regulatory Economics, Springer, vol. 5(2), pages 183-97, June.
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