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Maximum-Revenue versus Optimum-Welfare Export Taxes

Author

Listed:
  • Clarke, Roger

    () (Cardiff Business School)

  • Collie, David R.

    () (Cardiff Business School)

Abstract

In a game between two exporting countries, both countries may be better off if they both delegate to policymakers who maximise tax revenue rather than welfare. However, both countries delegating to policymakers who maximise revenue is not necessarily a Nash equilibrium. The game may be a prisoner's dilemma where both countries are better off delegating to policymakers who maximise revenue, but both will delegate to policymakers who maximise welfare in the Nash equilibrium. This result is obtained in the Bertrand duopoly model of Eaton and Grossman (1986) and the perfectly competitive model of Panagariya and Schiff (1995).

Suggested Citation

  • 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.
  • Handle: RePEc:cdf:wpaper:2006/22
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. David Collie, 1997. "Delegation and Strategic Trade Policy," International Economic Journal, Taylor & Francis Journals, vol. 11(3), pages 35-46.
    4. Yilmaz, Kamil, 1999. "Optimal export taxes in a multicountry framework," Journal of Development Economics, Elsevier, vol. 60(2), pages 439-465, December.
    5. David Collie & Roger Clarke, 2006. "Export Taxes under Bertrand Duopoly," Economics Bulletin, AccessEcon, vol. 6(6), pages 1-8.
    6. 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.
    7. Piermartini, Roberta, 2004. "The role of export taxes in the field of primary commodities," WTO Discussion Papers 4, World Trade Organization (WTO), Economic Research and Statistics Division.
    8. 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.
    9. Toru Kikuchi, 1998. "Strategic Export Policy in a Differentiated Duopoly: A Note," Open Economies Review, Springer, vol. 9(4), pages 315-325, October.
    10. 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.
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    More about this item

    Keywords

    Trade Policy; Export Taxes; Game Theory; Delegation;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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