Taxation and Predatory Prices in a Spatial Model
AbstractUsing a spatial model with two separated markets, we study how taxation alters the incentive to prey of an incumbent firm facing a potential entrance by another firm. We show that for intermediate levels of the transportation costs, the higher are taxes the lower are the expected gains from the predatory strategy. We also show that under some conditions setting a positive level of taxes may induce a duopolistic equilibrium instead of a monopolistic one, and this ultimately increases welfare.
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Bibliographic InfoPaper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0092.
Date of creation: Mar 2010
Date of revision:
Taxation; Predation; Spatial model.;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-MIC-2010-04-17 (Microeconomics)
- NEP-URE-2010-04-17 (Urban & Real Estate Economics)
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- Wen-Chung Guo & Fu-Chuan Lai, 2013. "The role of an intermediate market within the barbell model," Letters in Spatial and Resource Sciences, Springer, vol. 6(3), pages 151-161, November.
- Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
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