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On preferences and taxation mechanisms in strategic bilateral exchange

Author

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  • Ludovic A. Julien

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Cyrinus Elegbede
  • Louis de Mesnard

Abstract

In this paper we investigate the effectiveness and the welfare implications of various fiscal policies in strategic bilateral trade. To this end, we reconsider the class of bilateral oligopoly models with taxation implemented in Gabszewicz and Grazzini (1999, 2001). Assuming the preferences of traders are represented by CES utility functions with non unitary shares on consumption, we determine the Cournot-Nash equilibria, and we study the effects of two fiscal policies with transfers. We show that both fiscal policies with transfers implement a first-best allocation only when commodities are perfect complements or perfect substitutes.

Suggested Citation

  • Ludovic A. Julien & Cyrinus Elegbede & Louis de Mesnard, 2022. "On preferences and taxation mechanisms in strategic bilateral exchange," Post-Print hal-03231294, HAL.
    • Handle: RePEc:hal:journl:hal-03231294
    DOI: 10.1007/s10058-021-00253-8
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    References listed on IDEAS

    as
    1. Bloch, Francis & Ghosal, Sayantan, 1997. "Stable Trading Structures in Bilateral Oligopolies," Journal of Economic Theory, Elsevier, vol. 74(2), pages 368-384, June.
    2. B. C. Eaton & Richard G. Harris (ed.), 1997. "Trade, Technology and Economics," Books, Edward Elgar Publishing, number 1020.
    3. Lisa Grazzini, 2006. "A Note on Ad Valorem and Per Unit Taxation in an Oligopoly Model," Journal of Economics, Springer, vol. 89(1), pages 59-74, October.
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    5. Myles, Gareth D., 1989. "Ramsey tax rules for economies with imperfect competition," Journal of Public Economics, Elsevier, vol. 38(1), pages 95-115, February.
    6. Jean J. Gabszewicz & Lisa Grazzini, 1999. "Taxing Market Power," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(4), pages 475-497, October.
    7. Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-968, October.
    8. Amir, Rabah & Bloch, Francis, 2009. "Comparative statics in a simple class of strategic market games," Games and Economic Behavior, Elsevier, vol. 65(1), pages 7-24, January.
    9. Cordella, Tito & Gabszewicz, Jean J., 1998. ""Nice" Trivial Equilibria in Strategic Market Games," Games and Economic Behavior, Elsevier, vol. 22(1), pages 162-169, January.
    10. Sahi, Siddhartha & Yao, Shuntian, 1989. "The non-cooperative equilibria of a trading economy with complete markets and consistent prices," Journal of Mathematical Economics, Elsevier, vol. 18(4), pages 325-346, September.
    11. Guesnerie, Roger & Laffont, Jean-Jacques, 1978. "Taxing price makers," Journal of Economic Theory, Elsevier, vol. 19(2), pages 423-455, December.
    12. GABSZEWICZ, Jean & GRAZZINI, Lisa, 2000. "Strategic multilateral exchange and taxes," LIDAM Discussion Papers CORE 2000063, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Alexis Akira Toda & Kieran James Walsh, 2017. "Edgeworth box economies with multiple equilibria," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 65-80, April.
    14. Giraud, Gael, 2003. "Strategic market games: an introduction," Journal of Mathematical Economics, Elsevier, vol. 39(5-6), pages 355-375, July.
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    Cited by:

    1. Ludovic A. Julien & Gagnie Pascal Yebarth, 2024. "Pareto-Optimal Taxation Mechanism in Noncooperative Strategic Bilateral Exchange," Working Papers hal-04604299, HAL.

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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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