Taxation and the sustainability of collusion: ad valorem versus specific taxes

Azacis, Helmuts ORCID: https://orcid.org/0000-0002-6061-2100 and Collie, David ORCID: https://orcid.org/0000-0002-3132-648X 2014. Taxation and the sustainability of collusion: ad valorem versus specific taxes. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

Assuming constant marginal cost, it is shown that a switch from specific to ad valorem taxation has no effect on the critical discount factor required to sustain collusion. This result is shown to hold for Cournot oligopoly as well as for Bertrand oligopoly when collusion is sustained with Nash-reversion strategies or optimal-punishment strategies. In a Cournot duopoly model with linear demand and quadratic costs, it is shown that the critical discount factor is lower with an ad valorem tax than with a specific tax. However, in contrast to Colombo and Labrecciosa (2013), it is shown that revenue is always higher with an ad valorem tax than with a specific tax.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	28 Oct 2022 10:22
URI:	https://orca.cardiff.ac.uk/id/eprint/78017

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