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Optimal taxation in a common resource oligopoly game

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  • Michele Bisceglia

    (Università degli Studi di Bergamo)

Abstract

In this paper, we study the optimal tax policy in a differential oligopoly game where the competing firms share the access to a productive renewable resource. We show that, in a Feedback Nash Equilibrium of the game, a linear Markov tax, imposed on the output, and specified as an affine function of the available resource stock, leads the competing firms to produce the socially optimal quantities over time, thus overcoming the dynamic interplay between the tragedy of the commons and the firms’ market power. The optimal tax turns out to be independent from the resource stock in a monopoly, and it cannot be defined in a duopoly.

Suggested Citation

  • Michele Bisceglia, 2020. "Optimal taxation in a common resource oligopoly game," Journal of Economics, Springer, vol. 129(1), pages 1-31, January.
    • Handle: RePEc:kap:jeczfn:v:129:y:2020:i:1:d:10.1007_s00712-019-00662-y
    DOI: 10.1007/s00712-019-00662-y
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Michele Bisceglia & Roberto Cellini & Luca Grilli, 2022. "On the dynamic optimality of yardstick regulation," Annals of Operations Research, Springer, vol. 315(1), pages 73-92, August.
    2. Minchuk, Yizhaq & Sela, Aner, 2023. "Subsidy and taxation in all-pay auctions under incomplete information," Games and Economic Behavior, Elsevier, vol. 140(C), pages 99-114.
    3. Aner Sela & Yizhaq Minchuk, 2024. "Carrots and sticks: collaboration of taxation and subsidies in contests," Working Papers 2407, Ben-Gurion University of the Negev, Department of Economics.
    4. Yizhaq Minchuk & Aner Sela, 2021. "Subsidy and Taxation in All-Pay Auctions under Incomplete," Working Papers 2104, Ben-Gurion University of the Negev, Department of Economics.

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    More about this item

    Keywords

    Tragedy of the commons; Renewable resource oligopoly; Differential game; Optimal tax policy; Linear Markov tax;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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