In this article we analyze taxation using the conjectural variations model of oligopoly. We demonstrate the way in which the incidence of a tax depends on the pattern of firm interaction. The results obtained have important implications for the controversy surrounding the question of whether a tax on corporate income can be overshifted. We also study normative aspects of taxation. The focus here is on the errors that can arise in excess burden calculations when incorrect assumptions on market structure are made.
Get full access to this article
View all access options for this article.
References
1.
BresnahanT. F. (1981) “Duopoly models with consistent conjectures.”. Amer. Econ. Rev.71, 5: 934–945.
2.
CraggJ. G.HarbergerA. C.MieszkowskiP. (1967) “Empirical evidence on the incidence of the corporation income tax.”. J. of Pol. Economy75, 6: 811–821.
3.
FeldsteinM. S. (1974) “Tax incidence in a growing economy with variable factor supply.”. Q. J. of Economics88: 551–573.
4.
FullertonD.ShovenJ. B.WhalleyJ. (1978) “General equilibrium analysis of U.S. taxation policy,” pp. 23–58 in 1978 Compendium of Tax Research. Washington, DC: Office of Tax Analysis, Department of the Treasury.
5.
GollopF. M.RobertsM. J. (1979) “Firm interdependence in oligopolistic models.”. J. of Econometrics10: 313–331.
6.
HarbergerA. C. (1974) “The incidence of the corporation income tax,” pp. 135–162 in HarbergerA. C. (ed.) Taxation and Welfare. Boston: Little, Brown.
7.
KrzyzaniakM.MusgraveR. A. (1963) The Shifting of the Corporation Income Tax. Baltimore: Johns Hopkins Univ. Press.
8.
MusgraveR. A. (1959) The Theory of Public Finance. New York: McGraw-Hill.
9.
SeadeJ. (1983) “Prices, profits, and oligopoly.” University of Warwick. (mimeo).
10.
SeadeJ. (1980) “On the effects of entry.” Econometrica (March): 479–489.
11.
SternN. (1982) Market Structure, Dual Pricing, and Taxes. Discussion Paper 13. University of Warwick.
12.
TreschR. W. (1981) Public Finance: A Normative Theory. Plano, TX: Business Publications.
