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Tax competition in a Bertrand-Edgeworth model

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  • Schulze, Günther G.
  • Koch, Karl-Josef

Abstract

Tax competition of two countries for foreign direct investment is analyzed in a Bertrand-Edgeworth dyopoly model. In the Symmetrie case zero-taxation is the unique equilibrium in pure strategies. If assymmetries are introduced only e-equilibria will exist. However, if the tax rate applies to foreign direct investment as well as to domestic sources (i.e. players have an outside option) there is no equilibrium in pure strategies.

Suggested Citation

  • Schulze, Günther G. & Koch, Karl-Josef, 1990. "Tax competition in a Bertrand-Edgeworth model," Discussion Papers, Series II 116, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:116
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    References listed on IDEAS

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    1. Beth Allen & Martin Hellwig, 1986. "Bertrand-Edgeworth Oligopoly in Large Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(2), pages 175-204.
    2. Geroski, P.A., 1988. "James Friedman, Game Theory with Applications to Economics, Oxford University Press, Cambridge, Massachusetts and London, England (1986), p. 262," International Journal of Industrial Organization, Elsevier, vol. 6(2), pages 275-277.
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    Cited by:

    1. Lorz, Jens Oliver, 1993. "Der Wettbewerb um international mobiles Kapital: Auswirkungen auf die nationale Finanzpolitik und die intertemporale Kapitalallokation," Kiel Working Papers 608, Kiel Institute for the World Economy.
    2. Haufler, Andreas, 1994. "Unilateral tax reform under the restricted origin principle," European Journal of Political Economy, Elsevier, vol. 10(3), pages 511-527, October.

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