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Tax analysis in a limit pricing model

Author

Listed:
  • Felix Marcos

    (Instituto Complutense de Análisis Económico. Universidad Complutense Campus de Somosaguas. Madrid.)

Abstract

This paper deals with taxation, profits of firms and welfare. More specifically it analyses the effect of a lump sum tax on a noncompetitive market with free entry. The main result is that there are relevant situations in which the tax increases the profits of the incumbent firms. Unfortunately this goes with a reduction in consumer suplus (and in social welfare measured by consumer surplus, plus profits of firms plus revenues of the Government). But a way is suggested and some examples given in which that problem can be overcome.

Suggested Citation

  • Felix Marcos, 1993. "Tax analysis in a limit pricing model," Documentos de Trabajo del ICAE 9304, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    • Handle: RePEc:ucm:doicae:9304
    as

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    References listed on IDEAS

    as
    1. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    2. Takashi Omori & George Yarrow, 1982. "Product Diversification, Entry Prevention and Limit Pricing," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 242-248, Spring.
    3. Michael L. Katz & Harvey S. Rosen, 1985. "Tax Analysis in an Oligopoly Model," Public Finance Review, , vol. 13(1), pages 3-20, January.
    4. Corchon, Luis C. & Marcos, Felix, 1988. "Entry, stackelberg equilibrium and reasonable conjectures," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 509-515.
    Full references (including those not matched with items on IDEAS)

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