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On Taxation Policy in Strategic Bilateral Exchange: A review

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  • Gagnie Pascal Yebarth

Abstract

This paper provides a comprehensive review of the literature on tax policy within the framework of strategic market games (SMG). We refer to a simple prototype of SMGs called bilateral oligopoly models. The review reveals that the effects and effectiveness of redistributive tax policies depend on the preferences of individuals who behave strategically in trade. A crucial element of this analysis is the influence of strategic interactions on the price formation mechanism and, therefore, on the optimality of a tax-and-transfer policy to improve allocation efficiency. Then, we connect our findings to broader discussions in the literature, specifically regarding the effects of taxation on general and partial equilibrium (tax incidence: ad valorem versus per unit taxes; optimal taxation and market power; market imperfections, strategic interactions, and taxation). Although the comparison remains conceptually complicated, we show the complementarity of the diverse literature.

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  • Gagnie Pascal Yebarth, 2025. "On Taxation Policy in Strategic Bilateral Exchange: A review," EconomiX Working Papers 2025-34, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2025-34
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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