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Taxation and Predatory Prices in a Spatial Model

  • Stefano Colombo

    ()

    (DISCE, Università Cattolica)

Using a spatial model with two separated markets, we study how taxation alters the incentive to prey of an incumbent firm facing a potential entrance by another firm. We show that for intermediate levels of the transportation costs, the higher are taxes the lower are the expected gains from the predatory strategy. We also show that under some conditions setting a positive level of taxes may induce a duopolistic equilibrium instead of a monopolistic one, and this ultimately increases welfare.

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File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0092.pdf
File Function: First version, 2010
Download Restriction: no

Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Economia e Finanza with number ief0092.

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Length: 21
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:ctc:serie3:ief0092
Contact details of provider: Web page: http://www.unicatt.it/Istituti/EconomiaFinanzaEmail:


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