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Equilibrium in fiscal competition games from the point of view of the dual

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  • Petchey, Jeffrey D.
  • Shapiro, Perry

Abstract

Papers that examine fiscal competition for mobile factors of production commonly employ simultaneous move games between two states and focus on the inefficiency of the equilibria. Most often, the existence of the equilibrium is left unexplored. By examining decision making by governments that make only constrained efficient choices, we derive sufficient conditions for the existence of equilibria when there are multiple policy instruments, multiple mobile factors and many different production processes. Convexity of the minimum cost function, "dual" to the factor preferences and production function primitives, is sufficient to ensure the existence of equilibrium. We also find that equilibrium may not exist because of the economies of scale inherent in provision of public goods which benefit mobile factors.

Suggested Citation

  • Petchey, Jeffrey D. & Shapiro, Perry, 2009. "Equilibrium in fiscal competition games from the point of view of the dual," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 97-108, January.
  • Handle: RePEc:eee:regeco:v:39:y:2009:i:1:p:97-108
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Taugourdeau, Emmanuelle & Ziad, Abderrahmane, 2011. "On the existence of Nash equilibria in an asymmetric tax competition game," Regional Science and Urban Economics, Elsevier, vol. 41(5), pages 439-445, September.
    2. Eckhard Janeba & Maximilian Todtenhaupt, 2016. "Fiscal Competition and Public Debt," CESifo Working Paper Series 6155, CESifo Group Munich.
    3. Sebastian Hauptmeier & Ferdinand Mittermaier & Johannes Rincke, 2008. "Fiscal Competition over Taxes and Public Inputs: Theory and Evidence," CESifo Working Paper Series 2499, CESifo Group Munich.
    4. Kempf, Hubert & Rota-Graziosi, Grégoire, 2010. "Endogenizing leadership in tax competition," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 768-776, October.
    5. Grégoire ROTA-GRAZIOSI & Hubert KEMPF, 2009. "Leading and losing the tax competition race," Working Papers 200921, CERDI.
    6. Sebastian HAUPTMEIER & Johannes RINCKE, "undated". "Tax and Public Input Competition - Evidence from Germany," EcoMod2009 21500038, EcoMod.

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