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Profitable Cost Increases and the Shifting of Taxation : Equilibrium Response of Markets in Oligopoly

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  • Seade, J
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    Abstract

    This paper considers the conjectural variations model of oligopoly and introduces a shift in its equilibrium solution : a cost-side shift, such as a change in technology or input prices, or the introduction of excise tax. The equilibrium effects of this cost-displacement are then found, deriving and examining explicit expressions for the resulting movements in individual outputs and hence in price, profits and market structure. The main motivation we offer for the exercise is methodological : to derive, for the model adopted, certain industrial-organization results of general interest and applicability, which we then put to work mostly in a more specific public finance context. The results we are referring to are, very simply, the comparative statics (of our model) of oligopoly, in response to changes in costs. It is indeed surprising that the problem is not one which has been treated systematically in the literature except for particular cases, such as special functional forms and / or symmetric industry

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp_260.pdf
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    Bibliographic Info

    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 260.

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    Length: 33 pages
    Date of creation: 1985
    Date of revision:
    Handle: RePEc:wrk:warwec:260

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    Cited by:
    1. Don Fullerton & Gilbert Metcalf, 2002. "The Distribution of Tax Burdens," Discussion Papers Series, Department of Economics, Tufts University 0201, Department of Economics, Tufts University.
    2. Gilbert E. Metcalf & Don Fullerton, 2002. "The Distribution of Tax Burdens: An Introduction," NBER Working Papers 8978, National Bureau of Economic Research, Inc.
    3. Aditya Bhattacharjea, 2001. "Import Quotas, Export Promotion and Intra-Industry Trade," Working papers 96, Centre for Development Economics, Delhi School of Economics.
    4. Hassan Benchekroun & Licun Xue, 2006. "Cartel Stability In A Dynamic Oligopoly With Sticky Prices," Departmental Working Papers 2005-08, McGill University, Department of Economics.
    5. Sophia Delipalla & Owen O'Donnell, 1999. "Estimating Tax Incidence, Market Power and Market Conduct: The European Cigarette Industry," Studies in Economics 9901, Department of Economics, University of Kent.
    6. Choi, Kangsik, 2012. "Indirect Taxation and Privatization in a Model of Government's Preference," MPRA Paper 42968, University Library of Munich, Germany.
    7. Finkelstein, Eric A. & Zhen, Chen & Bilger, Marcel & Nonnemaker, James & Farooqui, Assad M. & Todd, Jessica E., 2013. "Implications of a sugar-sweetened beverage (SSB) tax when substitutions to non-beverage items are considered," Journal of Health Economics, Elsevier, vol. 32(1), pages 219-239.
    8. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528 - 583.
    9. Simon GB Cowan & Simon Cowan, 2004. "Demand shifts and imperfect competition," Economics Series Working Papers 188, University of Oxford, Department of Economics.
    10. Boone, J. & Müller, W., 2008. "The Distribution of Harm in Price-Fixing Cases," Discussion Paper 2008-68, Tilburg University, Center for Economic Research.
    11. Grossman, Gene M & Shapiro, Carl, 1988. "Foreign Counterfeiting of Status Goods," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 79-100, February.
    12. James W. Bono & David H. Wolpert, 2009. "How to Use Decision Theory to Choose Among Mechanisms," Working Papers 2009-11, American University, Department of Economics.
    13. Mattoo, Aaditya, 2001. "Can no competition policy be better than some competition policy?," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 55-77, January.
    14. Luigi Filippini, 2002. "Cost Reduction, Licensing and Incentive to Innovate: A Note," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(1), pages 51-59.
    15. Sophia Delipalla & Owen O'Donnell, 1998. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition: Evidence from the European Cigarette Industry," Studies in Economics 9802, Department of Economics, University of Kent.
    16. Besley, Timothy J. & Rosen, Harvey S., 1999. "Sales Taxes and Prices: An Empirical Analysis," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 157-78, June.

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