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Competitive wages and tax evasion in a Cournot duopoly

Author

Listed:
  • Domenico Buccella

    (Kozminski University)

  • Luciano Fanti

    (University of Pisa)

  • Luca Gori

    (University of Pisa, Global Labor Organization
    Global Labor Organization)

Abstract

In a Cournot duopoly with indirect tax evasion, this paper counter-intuitively shows that, in the presence of positive competitive wages, a higher indirect taxation may increase expected profits. This result is likely to occur if the market size (or alternatively, if the cost pressure exerted by wages) is adequately large and the detection probability is not too high, and it is equivalent irrespective of firms optimally choosing either the tax base to disclose to the tax authority or the amount of evasion tout-court.

Suggested Citation

  • Domenico Buccella & Luciano Fanti & Luca Gori, 2024. "Competitive wages and tax evasion in a Cournot duopoly," Theory and Decision, Springer, vol. 97(3), pages 585-594, November.
    • Handle: RePEc:kap:theord:v:97:y:2024:i:3:d:10.1007_s11238-024-09987-7
    DOI: 10.1007/s11238-024-09987-7
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    References listed on IDEAS

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