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Maximum-revenue versus Optimum-welfare Export Taxes: a Delegation Game

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  • Roger Clarke
  • David R. Collie

Abstract

In the Eaton and Grossman (1986 ) Bertrand duopoly model of strategic export taxes, both countries may be better off if they both delegate to policymakers who maximize tax revenue rather than welfare. However, both countries delegating to policymakers who maximize tax revenue is not a Nash equilibrium unless the degree of product substitutability is sufficiently high. For a wide range of values for the degree of product substitutability, the game is a prisoner's dilemma where both countries are better off delegating to policymakers who maximize tax revenue but both will delegate to policymakers who maximize welfare in the Nash equilibrium. Copyright © 2008 The Authors. Journal compilation © 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Roger Clarke & David R. Collie, 2008. "Maximum-revenue versus Optimum-welfare Export Taxes: a Delegation Game," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 919-929, November.
    • Handle: RePEc:bla:reviec:v:16:y:2008:i:5:p:919-929
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    References listed on IDEAS

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    1. Roger Clarke & David R . Collie, 2006. "Optimum-Welfare And Maximum-Revenue Tariffs Under Bertrand Duopoly," Scottish Journal of Political Economy, Scottish Economic Society, vol. 53(3), pages 398-408, July.
    2. Toru Kikuchi, 1998. "Strategic Export Policy in a Differentiated Duopoly: A Note," Open Economies Review, Springer, vol. 9(4), pages 315-325, October.
    3. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    4. David Collie & Roger Clarke, 2006. "Export Taxes under Bertrand Duopoly," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-8.
    5. Roger Clarke & David Collie, 2003. "Product differentiation and the gains from trade under Bertrand duopoly," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 658-673, August.
    6. David Collie, 1997. "Delegation and Strategic Trade Policy," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 35-46.
    7. Yilmaz, Kamil, 1999. "Optimal export taxes in a multicountry framework," Journal of Development Economics, Elsevier, vol. 60(2), pages 439-465, December.
    8. Bruno Larue & Jean-Philippe Gervais, 2002. "Welfare-maximizing and revenue-maximizing tariffs with a few domestic firms," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 786-804, November.
    9. Panagariya, Arvind & Schiff, Maurice, 1994. "Can revenue maximizing export taxes yield higher welfare than welfare maximizing export taxes?," Economics Letters, Elsevier, vol. 45(1), pages 79-84, May.
    10. Collie, David, 1991. "Optimum Welfare and Maximum Revenue Tariffs under Oligopoly," Scottish Journal of Political Economy, Scottish Economic Society, vol. 38(4), pages 398-401, November.
    11. Clarke, Roger & Collie, David R., 2006. "Maximum-Revenue versus Optimum-Welfare Export Taxes," Cardiff Economics Working Papers E2006/22, Cardiff University, Cardiff Business School, Economics Section.
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    Cited by:

    1. David R. Collie & Vo Phuong Mai Le, 2010. "Antidumping Regulations: Anti-Competitive and Anti-Export," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 796-806, November.
    2. Leonard Wang & Jen-yao Lee & Chin-shu Huang, 2012. "Maximum-Revenue and Optimum-Welfare Tariffs in International Mixed Duopoly: Does the Order of Firms’ Move Matter?," Journal of Industry, Competition and Trade, Springer, vol. 12(3), pages 273-283, September.
    3. Vijay Mohan & Bharat Hazari, 2012. "Tax Policy When Countries Compete for Third Market Exports," Pacific Economic Review, Wiley Blackwell, vol. 17(5), pages 708-728, December.
    4. repec:ebl:ecbull:eb-17-00359 is not listed on IDEAS
    5. Anomita Ghosh & Rupayan Pal, "undated". "Welfare ranking of alternative export tariffs revisited," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    6. Wang, Leonard F.S. & Lee, Jen-Yao, 2012. "Domestic entry, optimum-welfare and maximum-revenue tariffs," Research in Economics, Elsevier, vol. 66(1), pages 106-109.
    7. Stefan Csordás, 2010. "A Public Choice Approach to Strategic and Nonstrategic Environmental Policy," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 1001-1011, November.

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