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Profit taxation and capital accumulation in a dynamic oligopoly model

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  • Baldini, Massimo
  • Lambertini, Luca

Abstract

We illustrate a differential oligopoly game using the capital accumulation dynamics à la Ramsey. We evaluate the effects of profit taxation, proving that there exists a tax rate yielding the same steady state social welfare as under social planning. Contrary to the static approach, our dynamic analysis shows that, in general, profit taxation affects firms' decisions concerning capital accumulation and sales. In particular, it has pro-competitive effects provided that the extent of delegation is large enough (and conversely).

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  • Baldini, Massimo & Lambertini, Luca, 2011. "Profit taxation and capital accumulation in a dynamic oligopoly model," Japan and the World Economy, Elsevier, vol. 23(1), pages 13-18, January.
    • Handle: RePEc:eee:japwor:v:23:y:2011:i:1:p:13-18
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    Cited by:

    1. Horn‐In Kuo & Cheng‐Hau Peng & K. L. Glen Ueng, 2021. "On the Neutrality of Profit Taxation in a Mixed Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 1012-1021, October.
    2. R. Cellini & L. Lambertini, 2008. "Weak and Strong Time Consistency in a Differential Oligopoly Game with Capital Accumulation," Journal of Optimization Theory and Applications, Springer, vol. 138(1), pages 17-26, July.
    3. R. Cellini & L. Lambertini, 2001. "Differential Oligopoly Games where the Closed-Loop Memoryless and Open-Loop Equilibria Coincide," Working Papers 402, Dipartimento Scienze Economiche, Universita' di Bologna.

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