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Tax Principles, Product Differentiation and the Nature of Competition

  • Nigar Hashimzade

    ()

  • Hassan Khodavaisi

    ()

  • Gareth Myles

    ()

We analyze the choice between the origin and destination principles of taxation when there is product differentiation and Bertrand competition. If taxes are redistributed to consumers and demand is linear the origin principle dominates the destination principle whatever the degree of product differentiation and extent of economic integration. With nonlinear demand the origin principle dominates if there is sufficient economic integration. When the social value assigned to tax revenue is higher than the private value, the destination principle dominates for intermediate values of product differentiation and economic integration. The same results are also shown to hold with Cournot competition. Copyright Springer Science + Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s10797-005-0411-1
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Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 12 (2005)
Issue (Month): 6 (November)
Pages: 695-712

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Handle: RePEc:kap:itaxpf:v:12:y:2005:i:6:p:695-712
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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  1. Pfluger, Michael & Andreas Haufler, 2003. "International Commodity Taxation under Monopolistic Competition," Royal Economic Society Annual Conference 2003 165, Royal Economic Society.
  2. Austan Goolsbee, 1998. "In a World Without Borders: The Impact of Taxes on Internet Commerce," NBER Working Papers 6863, National Bureau of Economic Research, Inc.
  3. Ben Lockwood & David Meza & Gareth Myles, 1994. "When are origin and destination regimes equivalent?," International Tax and Public Finance, Springer, vol. 1(1), pages 5-24, February.
  4. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," Munich Reprints in Economics 19846, University of Munich, Department of Economics.
  5. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
  6. Michael Keen and Sajal Lahiri, . "The Comparison Between Destination and Origin Principles Under Imperfect Competition," Economics Discussion Papers 424, University of Essex, Department of Economics.
  7. Lockwood, B., 2000. "Tax Competition and Tax Co-Ordination Under Destination and Origin Principles: A Synthesis," The Warwick Economics Research Paper Series (TWERPS) 567, University of Warwick, Department of Economics.
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