agricultural intensification irrigation and the environment in south asia issues and policy options high population pressure and the rapid pace of human activity including urbanization industrialization and other economic activities have led to a dwindling supply of arable land per capita and a process of agricultural intensification in south asia while this process has significantly increased food production to feed the growing population it has also entailed considerable damage to the physical environment including degradation and depletion of natural resources and unsustainable use of land and water resources this paper employs the analytical tools of economic theory environmental and ecological economics to model the impact of irrigation in south asia it underscores the need for an eclectic approach to policy responses stemming from private and common property rights theories externality theory and sustainability theory with a view to environmentalizing agricultural development

war peace and the size of countries this paper studies the relationship between international con ict and the size distribution of countries in a model in which both peaceful bargaining and non peaceful confrontations are possible we show how the size distribution of countries depends on the likelihood bene ts and costs of con ict and war we also study the role of international law and show how better de ned international property rights may lead to country breakup and more numerous local con icts

when does communication improve coordination we study costless pre play communication of intentions among inexperienced players using the level k model of strategic thinking to describe players beliefs we fully characterize the effects of preplay communication in symmetric 2 2 games one way communication weakly increases coordination on nash equilibrium outcomes although average payoffs sometimes decrease two way communication further improves payoffs in some games but is detrimental in others moving beyond the class of symmetric 2 2 games we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities but there are also games in which any type of communication hampers coordination jel c72 d83

a theory of disagreement in repeated games with bargaining this paper proposes a new approach to equilibrium selection in repeated games with transfers supposing that in each period the players bargain over how to play although the bargaining phase is cheap talk following a generalized alternating offer protocol sharp predictions arise from three axioms two axioms allow the players to meaningfully discuss whether to deviate from their plan the third embodies a theory of disagreement that play under disagreement should not vary with the manner in which bargaining broke down equilibria that satisfy these axioms exist for all discount factors and are simple to construct all equilibria generate the same welfare optimal play under agreement generally requires suboptimal play under disagreement whether patient players attain efficiency depends on both the stage game and the bargaining protocol the theory extends naturally to games with imperfect public monitoring and heterogeneous discount factors and yields new insights into classic relational contracting questions

communication structure and coalition proofness experimental evidence abstract the paper analyzes the role of the structure of communication i e who is talking with whom in a coordination game we run an experiment in a three player game with pareto ranked equilibria where a pair of players has a profitable joint deviation from the pareto superior equilibrium we show that specific communication structures lead to different coalition proof equilibria in this game results match the theoretical predictions subjects communicate and play the pareto superior equilibrium when communication is public when pairs of players exchange messages privately subjects play the pareto inferior equilibrium even in these latter cases however players beliefs and choices tend to react to messages despite the fact that these are not credible

communication computability and common interest games abstract this paper provides a theory of equilibrium selection for one shot two player finite action strategic form common interest games a single round of costless unlimited preplay communication is allowed players are restricted to using strategies that are computable in the sense of church s thesis the equilibrium notion used involves perturbations that are themselves computable the only equilibrium payoff vector that survives these strategic restrictions and the computable perturbations is the unique pareto efficient one journal of economic literature classification numbers c72 c79

is there a hold up problem most literature on the hold up problem starts from the assumption that ex post bargaining outcomes are insensitive to prior investment costs we argue that this approach is unsatisfactory if the bargaining procedure is relatively symmetric it typically admits multiple perfect equilibria some of which give the investor a high enough payofi to sustain e cient investment even if the bargaining procedure is asymmetric and rigged against the investor there may be investment if agents are driven by moral concerns or if communication creates commitment laboratory experiments indicate that communication is necessary and su cient for agents to coordinate on e cient outcomes when the bargaining game is symmetric when the bargaining game is rigged against the investor the hold up problem is mitigated but not eliminated by moral behavior communication is quite credible and we flnd that promises are more believable than threats

promises and endogenous reneging costs we present a novel theoretical mechanism that explains the capacity for non enforceable communication about future actions to improve efficiency we explore a two player partnership game where before choosing a level of effort to exert on a joint project each player makes a cheap talk promise to their partner about their own future effort we allow agents to incur a psychological cost of reneging on their promises we demonstrate a strong tendency for evolutionary processes to select agents who incur intermediate costs of reneging and show that these intermediate costs induce second best optimal outcomes

endogenous transfer pricing and the effects of uncertain regulation abstract a scenario is constructed under which a multinational firm mnf faces a threat of a penalty the probability of which is based on the mnf s transfer price given this scenario the mnf s optimum transfer price could be in the interior and simultaneous interaction of the transfer price and real variables exists increased surveillance of the transfer price makes the mnf move its transfer price towards the arm s length price and checks fiscal abuses but it worsens the international allocation of resources even though the cost advantage of the exporting country increases still the impact on global welfare is ambiguous

labor absorption and agricultural development bangladesh s experience and predicament significant employment gains have resulted from the green revolution technologies in bangladesh while the kharif wet season employment has remained more or less stagnant employment in the rabi dry season increased fourfold between the early 1960s and the late 1980s with overall crop sector employment increasing by 30 interseasonal differences in employment have declined steadily the employment generating effect of the green revolution is slowing down i e agricultural growth at the margin has become progressively less labor intensive in recent years changes in the occupational structure may merely reflect a relocation of surplus labor from the farm to the nonfarm sector where it is also largely surplus rather than heralding a real turning point in bangladesh there is little prospect of agriculture providing much greater employment and there is little sign that labor transfer in bangladesh will lead to a pattern of successful industrialization as in the contemporary developed countries of east asia or the western countries

lobbying and asymmetric information informational lobbying the use by interest groups of their alleged expertise or private information on matters of importance for policymakers in an attempt to persuade them to implement particular policies is often regarded as an important means of influence this paper analyzes this phenomenon in a game setting on the one hand the interest group is assumed to have private information which is relevant to the policymaker whilst on the other hand the policymaker is assumed to be fully aware of the strategic incentives of the interest group to mis report or conceal its private information

communication and superior cooperation in two player normal form games abstract in many games players may be able to cooperate for their collective benefit without jeopardizing individual rationality however attaining such superior cooperation requires that players conform to a specific axiom of behavior in this paper i demonstrate that pre play communication also stimulates superior cooperation

the taxing task of taxing transnationals financial and real investment flexibility tax competition and superior economic information by transnationals both create a rationale for corporate income taxation and limit the effectiveness of such taxation while these factors have led to a variety of transnational tax policies such as deferral double taxation apportionment and trade rules very few of these institutional features have been integrated into tax competition and agency models in this paper i show how the integration of investment flexibility tax competition and agency issues is crucial to our understanding of corporate tax policies

cross border tax effects on affiliate investment evidence from european multinationals recent studies suggest that multinational firm activities at home and abroad are positively correlated which may be due to the use of common inputs like marketing patents etc then a cost shock at one location may lead to reduced activity in all other locations within the firm in this paper we theoretically and empirically analyze national corporate tax policy in such a setting our main hypothesis is that corporate taxation at the parent location not only reduces the parent s capital stock but also lowers capital stocks at affiliates abroad using micro data on european multinational firms we confirm the hypothesis showing that a 10 percentage point increase in corporate tax rates is associated with a 5 6 decrease in the affiliate s capital stock from a welfare point of view this cross border tax effect on the capital stock gives rise to a negative fiscal externality of corporate taxation which is empirically shown to compensate a substantial fraction of the well known positive externality due to profit shifting

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

migration and the evolution of conventions we study an evolutionary model where agents are locally matched to play a symmetric coordination game opportunities to adjust strategy and location arrive asynchronously and infrequently and cannot be coordinated our results on the short run co existence of different conventions and long run efficiency depend upon a condition on off equilibrium payoffs introduced by aumann in a pure coordination game efficient and inefficient conventions may co exist at different locations in the short run and inefficient conventions are stochastically stable in a stag hunt game there is neither short run coexistence nor long run inefficiency

coveting thy neighbor s manufacturing the dilemma of state income apportionment abstract this paper investigates the economic impact of the apportionment formulae used to divide corporate income taxes among the states most apportionment formulae by including payroll turn the state corporate income tax at least partially into a payroll tax using panel data from 1978 1994 the results show that this distortion has an important effect on state level employment for the average state reducing the payroll weight from one third to one quarter increases manufacturing employment around 1 1 concentrated in durable goods manufacturing and with larger effects in the long run the results also suggest that apportionment changes have important negative externalities on other states on average the aggregate effects of apportionment formula changes are close to zero

shifting mne taxation from national to global profits a radical reform long overdue the current separate accounting taxation of corporations gives governments the right to tax the national incomes of firms operating within their borders however multinational and increasingly digital business models beg the question what is national taxable income we argue that a radical rethink of the corporate taxation moving away from a separate taxation of national corporate income to a taxation of global corporate income allocated via formula apportionment is long overdue global corporate income as a basis for taxation is supported both by recent theoretical developments and corroborating empirical evidence with the eu and emerging economies including china already considering its adoption nor is it new as we relate formula apportionment of global corporate income was used a century ago before commercial and political interests promoted separate accounting thereby providing both precedent and experience to inform its re adoption

the choice of apportionment factors under formula apportionment thispaperinvestigatesthechoiceofapportionmentfactorsunderacorporatetaxsystemofformulaapportionment in contrast to perceived wisdom we show that the apportionment formula contains both mobile capital and immobile labor factors regardless of whether the formula is determined decentrally by jurisdictions or centrally by a central planner the central planner uses the formula as a corrective instrument to internalize fiscal externalities we calibrate the model to the european union and show that replacing the current system of separate accounting by formula apportionment would substantially increase tax revenue and welfare under both centralized and decentralized formula choices

communication coordination and nash equilibrium i note a methodological problem in studying the role of pre play communication in ensuring equilibrium to deal with this problem i define a solution concept for the extended game in which talk is followed by play that is intermediate between nash equilibrium and rationalizability in some games our solution concept implies a nash outcome while in others it does not

the european commission s proposal for a common consolidated corporate tax base the european commission is currently preparing a proposal for a directive on the introduction of a common consolidated corporate tax base ccctb this paper reviews the current state of the european commission s preparation of the ccctb proposal and discusses the implications for efficiency and fairness of the tax system the analysis concludes that more evidence of significant economic benefits from introducing a ccctb would be required to generate widespread support for the project

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

promises and conventions an approach to pre play agreements abstract i analyze how informal agreements can be sustained by moral emotions with regard to a large class of two player games specifically i assume that people feel guilty if they breach an agreement and that the guilt increases according to the degree of the harm inflicted on the other a central insight is that it is easier to sustain efficient informal agreements if actions are strategic complements than if they are strategic substitutes i complement this general insight by studying two specific cases where negotiators face uncertainty about the breach of the agreement i show that while the optimal agreement in a game with strategic substitutes must compromise on surplus maximization and efficiency the optimal agreement in a game with sufficiently strong strategic complements tends to maximize both the surplus and the probability of compliance especially if the game is symmetric

company tax reform with a water s edge this paper analyzes the effects of switching from a corporate tax system based on separate accounting sa towards a system in which two countries form a formula apportionment fa union while a third country sticks to sa water s edge our analysis draws a positive picture on the water s edge regulation in the short run for given tax rates the transition from sa to fa is likely to reduce profit shifting from the fa union to non fa tax havens in a long run tax competition analysis we find a negative water s edge externality under fa that tends to be less detrimental than the profit shifting externality under sa and may offset other externalities under fa

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

allowing firms to choose between separate accounting and formula apportionment taxation this paper analyzes the effect on firm behavior and national tax revenues of allowing multinational firms to choose to be taxed under separate accounting rules or an apportionment formula separate accounting always generates more profitable output and conditional labor demand distortions from tax differentials while either method can generate a more profitable income shifting distortion both low cost and high cost firms can prefer separate accounting while medium cost firms prefer formula apportionment with symmetric countries a firm s preferred method generates greater tax revenues in the country with the lower tax rate with asymmetric countries a firm s preferred method need no longer generate greater tax revenues in the lower tax rate country due to the fact that countries and firms now value tax base distortions differently with this misalignment of preferences some firms can choose the preferred method of both countries at fixed tax rates

formula apportionment vs separate accounting a private information perspective abstract in 2002 the european commission recommended that member countries use formula apportionment procedures to tax multinational companies this departure from the standard separate accounting transfer pricing approach is an attempt to reduce the costs and distortions associated with auditing transfer prices unfortunately apportionment formulas create their own economic distortions and contrary to popular belief they do not eliminate distortions due to asymmetric information between the multinational and the national tax authorities in this paper i explicitly model the role of private information in two tax competition games one in which tax liabilities are calculated under formula apportionment and one in which tax liabilities are calculated under separate accounting and transfer prices are audited switching to a formula apportionment system affects the after tax profit of multinationals and the tax revenues paid by both domestic and foreign firms the direction and magnitude of the changes depend on the accuracy of the auditing technology and non monotonically on multinational costs the switch will have different effects on the tax receipts from domestic and foreign firms

market games as social dilemmas abstract in an experimental exchange market based on shapley and shubik 1977 two types of players with different preferences and endowments independently submit quantities of the goods they wish to exchange in this context although the nash equilibria of the game involve zero or minimum trade we obtain intense trade close to levels that maximize social welfare going a step forward we implement communication within pairs of traders from the same horizontal and opposite vertical sides of the market overall we find that horizontal communication tends to reduce bids whereas vertical communication has no effect

language meaning and games a model of communication coordination and evolution language is a powerful coordination device we generalize the cheap talk approach to pre play communication by way of introducing a meaning cor respondence between messages and actions and by postulating two axioms met by natural languages players have a lexicographic preference second to material payoffs against deviating from the meaning correspondence under two sided communication in generic and symmetric n 3 n coordination games a nash equilibrium component in such a lexicographic communication game is evolutionarily stable if and only if it results in the unique pareto efficient out come of the underlying game we extend the analysis to one sided communica tion in arbitrary finite two player games jel c72 c73 z 3

tax revenue losses through cross border loss offset an insurmountable hurdle for formula apportionment abstract this paper analyzes the relevance of firm losses for tax revenues and welfare when switching from separate accounting to a system of tax base consolidation with formula apportionment we find that a system change unambiguously decreases tax revenues in the short run in which neither firms nor governments can adjust their behavior due to the cross border loss offset inherent in formula apportionment in the medium run in which only firms can adjust their strategies tax revenues are still lower under formula apportionment if the probability of incurring losses or the costs of profit shifting are sufficiently small however in the long run where firms and governments can adjust their behavior a switch from separate accounting to formula apportionment is beneficial under the aforementioned conditions furthermore we show that a higher weight on input shares in the apportionment formula may mitigate tax competition and thus increase tax revenues because contrary to output factors input factors provide a backstop against a shortfall of tax revenues due to loss making subsidiaries

leadership beliefs and coordination an explorative discussion although recent economics contributions represent important strides forward in the understanding of leadership behavior the cognitive and symbolic dimensions of the phenomenon have attracted virtually no interests from economists and game theorists i argue that an understanding of these dimensions may be founded on coordination games particularly to the extent that these illustrate interactive belief formation in this context leadership is defined as the taking of actions that coordinate the complementary actions of many people through the creation of belief conditions that at least substitute for common knowledge and where these actions characteristically consists of some act of communication directed at those being led the concept of common knowledge or its approximation by means of notions of common belief is argued to be particularly important to understanding leadership thus leaders may establish common knowledge conditions and assist the coordination of strategies in this way or make decisions in situations where coordination problems persist in spite of common knowledge acknowledgments

evolutionary stability in unanimity games with cheap talk abstract this paper studies a class of games of perfectly coinciding interests with a preplay communication stage added if messages are costless cheap talk there are inefficient nash equilibria even under communication however i show that only strategies that induce efficient outcomes are evolutionary stable

an evolutionary approach to pre play communication we add a round of pre play communication to a finite two player game played by a population of players pre play communication is cheap talk in the sense that it does not directly enter the payoffs the paper characterizes the set of strategies that are stable with respect to a stochastic dynamic adaptive process periodically players have an opportunity to change their strategy with a strategy that is more successful against the current population any strategy that weakly improves upon the current poorest performer in the population enters with positive probability when there is no conflict of interest between the players only the efficient outcome is stable with respect to these dynamics for general games the set of stable payoffs is typically large every efficient payoff recurs infinitely often

cheap talk coordination and entry we show how costless nonbinding nonverifiable communication cheap talk can achieve partial coordination among potential entrants into a natural monopoly industry where the payoffs are qualitatively like the battle of the sexes the analysis would apply equally in other economic situations with such payoffs for example bargaining under complete information or choosing compatibility standards while cheap talk helps achieve asymmetric coordination in a symmetric mixed strategy equilibrium it cannot achieve complete coordination if the game involves even a small amount of conflict

unmediated communication in repeated games with imperfect monitoring we show that any correlated equilibrium payoff of two player repeated games with imperfect monitoring and without discounting can be reached as the nash equilibrium payoff of the game extended by a universal mechanism of unmediated communication this result holds regardless the particular concept of equlibrium involved upper lower banach or uniform equlibrium the communication mechanism is built up by using commutative one way functions these functions are designed with the help of cryptographic tools

corporate income taxation of multinationals in a general equilibrium model abstract this paper contributes to the discussion on separate accounting versus formula apportionment in the corporate income taxation of multinational enterprises the innovation is that we consider a general equilibrium tax competition model with an endogenous interest rate in contrast to previous studies we show that tax rates are inefficiently low not only under separate accounting but also under formula apportionment moreover we identify a wide range of empirically relevant cases where formula apportionment is superior to separate accounting independent of the magnitude of the concealment cost of profit shifting the reason for the change in results is that one country s tax rate affects other countries additionally via changes in the interest rate

one sided patience with one sided communication does not justify stackelberg equilibrium abstract the theory of games with complete information in which a single patient longrun player faces a succession of short run opponents cannot plausibly be used to justify the stackelberg solution concept because if that player can select which subgame perfect equilibrium is to be played then she can presumably also change her selection consequently while she can choose among one shot nash outcomes she cannot achieve the stackelberg outcome

communication between rational agents abstract conventional game theoretic solution concepts never guarantee meaningful communication in cheap talk games i define a solution concept which does guarantee communication in some games i assume full rationality without imposing equilibrium conditions but add a natural behavioral assumption about how agents use language agents have a propensity to speak the truth and to believe others speak the truth but use the game s strategic incentives to check whether such behavior and beliefs are rational i also define and prove the existence of an equilibrium version of the concept and present examples where its predictions seem more natural than farrell s neologism proof equilibrium

costly communication and learning from failure in organizational coordination abstract this paper investigates the coordination failure that arises from combining two small pre existing groups and focuses on the reaction of group members to this change in environment in an experiment small groups were first able to establish a coordination history in a repeated minimum effort game in the second phase two groups with different histories were combined into a larger group unlike most of the previous literature subjects could endogenously choose to communicate in the newly formed group for a small fee while communication proved to be necessary for preventing coordination failure in the newly formed group only every second subject was willing to implement communication particularly subjects from groups with a less efficient coordination experience in the first phase were more likely to realize the potential of coordination failure in the new group and were thus more likely to decide for communication the results may be useful for understanding how groups coordinate in changing environments as they are common in economic contexts

signaling future actions and the potential for sacrifice we consider extensions of games where some players have the option of signaling future actions by incurring costs the main result is that in a class of games if one player can incur costs then forwards induction selects her most preferred outcome surprisingly the player does not have to incur any costs to achieve this the option alone suffices however when all players can incur costs one player s attempt to signal a future action is vulnerable to a counter signal by the opponent this vulnerability to counter signaling distinguishes signaling future actions from signaling types

new directions for modelling strategic behavior game theoretic models of communication coordination and cooperation in economic relationships author s crawford vp abstract in this paper i discuss the state of progress in applications of game theory in economics and try to identify possible future developments that are likely to yield further progress to keep the topic manageable i focus on a canonical economic problem that is inherently game theoretic that of fostering efficient coordination and cooperation in relationships with particular attention to the role of communication i begin with an overview of noncooperative game theory s principal model of behavior nash equilibrium i next discuss the alternative thinking and learning rationales for how real world actors might reach equilibrium decisions i then review how nash equilibrium has been used to model coordination communication and cooperation in relationships and discuss possible developments

co ordination spillovers and cheap talk abstract we analyze the role of cheap talk in two player games with one sided incomplete information we identify conditions under which 1 players can fully communicate and coordinate on efficient nash equilibria of the underlying complete information game and 2 players cannot communicate so cheap talk does not alter the equilibrium set of the bayesian game we present examples that illustrate several issues that arise when there is two sided incomplete information journal of economic literature classification numbers c72 d82

company taxation and tax spillovers separate accounting versus formula apportionment it is observed in the real world that taxes matter for location decisions and that multinationals shift profits by transfer pricing the us and canada use so called formula apportionment fa to tax corporate income and the eu is debating a switch from separate accounting sa to fa this paper develops a theoretical model that compares basic properties of fa to sa the focal point of the analysis is how changes in tax rates affect capital formation input choice and transfer pricing as well as on spillovers on tax revenue in other countries the analysis shows that a move from sa to fa will not eliminate such spillovers and will in cases identified in the paper actually aggravate them

corporate profit tax capital mobility and formula apportionment abstract the paper develops an analytical framework in which regional governments strategically determine the structure of the corporate profit tax system when an apportionment formula determines the proportion of the firms income subject to regional taxation the conclusions can be summarized as follows i regional governments subsidize capital through the corporate tax system ii tax rates become higher and the portion of capital costs that can be deducted from taxable income becomes smaller as the formula weighs more production shares iii the regionally provided good may be below or above the efficient level iv the extent of the distortion depends on the particular formula put into practice v regional governments strictly prefer a formula that exclusively weighs the production proportion to any other alternative

lying for strategic advantage rational and boundedly rational misrepresentation of intentions starting from hendricks and mcafee s 2000 example of the allies decision to feint at calais and attack at normandy on d day this paper models misrepresentation of intentions to competitors or enemies allowing for the possibility of bounded strategic rationality and rational players responses to it yields a sensible account of lying via costless noiseless messages in many cases the model has generically unique pure strategy sequential equilibria in which rational players exploit boundedly rational players but are not themselves fooled in others the model has generically essentially unique mixed strategy sequential equilibria in which rational players strategies protect all players from exploitation

why the european union should adopt formula apportionment with a sales factor using a two country tax competition model with a multinational enterprise mne this paper addresses the question of whether the european union should replace separate accounting sa in corporate income taxation by formula apportionment fa and if so which apportionment factors should be used our main result is that fa with a sales factor may mitigate or even eliminate fiscal externalities caused by the countries tax policy hence our analysis provides a microfoundation for the sales apportionment factor in an empirical calibration to the eu 15 we show that the transition from sa to fa with a sales only formula raises average tax rates by 2 and average tax revenues by 1 billion euros or 0 1 of gdp these effects result in an increase of welfare