strategic behavior in contests comment almost by definition contests involve strategy this is especially true in contests between unevenly matched contenders in a recent article avinash dixit 1987 explored strategic commitment in contests between a favorite and an underdog the favorite is defined as the player whose chance of victory exceeds one half at the nash equilibrium an underdog s chance is less than one half dixit concludes that if the favorite has the opportunity to move first then he will overcommit effort compared with the nash equilibrium an important implication of the favorite overcommitting effort is that strategic behavior leads to greater social costs see gordon tullock 1980 the opposite holds if the underdog has the opportunity to move first this paper demonstrates that the favorite will never overcommit effort given endogenous order of moves the favorite finds it advantageous to wait until the underdog moves surprisingly the underdog s best strategy is not to wait but to make the first move throwing the first punch the equilibrium order of play is for the underdog to move before the favorite in this equilibrium one never observes overcommitment of effort consequently extending dixit s model to allow for endogenous order of moves suggests that strategic behavior in contests will lead to undercommitment compared with nash behavior

agricultural price instability a survey of competing explanations and remedies there are two explanations for agricultural price dynamics one follows cobweb logic and models fluctuations driven by expectation errors but emphasises that these expectations create complex dynamics and possibly chaos the other stems from the rational expectations tradition of dynamics driven by real shocks the empirical evidence tends to support the latter but is not conclusive the rational expectations model generates an optimal dynamic path from which no improvement can be expected from public intervention however if we take account of all the potential market failures in agricultural markets and especially in developing countries this conclusion might require some qualifications although an appropriate policy design for stability has still to be achieved this paper surveys the positive and normative literature on agricultural prices highlighting empirical evidence and identifying remaining unresolved issues

contest design and optimal endogenous entry this paper derives the effort maximizing contest rule and the optimal endogenous entry in a context where potential participants bear fixed entry costs the organizer is allowed to design the contest under a fixed budget with two strategic instruments he sets the value of the prize purse and arranges a monetary transfer entry subsidy or fee for each participating contestant in other words the budget can either be used to subsidize participation or an entry fee can be charged to fund the prize purse the results show that the optimally designed contest attracts exactly two participating contestants in its unique subgame perfect equilibrium when there is a positive fixed entry cost and extracts all the surplus from participating contestants the study also shows that the direction and amount of the monetary transfer depend on the magnitude of the entry cost the contest organizer subsidizes entry when contestants bear substantial entry costs but charges an entry fee to fund the prize purse whenever the entry cost is sufficiently low

effort levels in contests with two asymmetric players a contest is a situation in which players compete with one another by expending effort to win a prize examples abound firms compete by spending rd 26 krueger 14 posner 20 rogerson 23 appelbaum and katz 1 hillman and riley 12 hirshleifer 13 ellingsen 8 nitzan 18 and baik 2 3 have studied rent seeking contests lazear and rosen 15 o keeffe viscusi and zeckhauser 19 and rosen 24 have examined performance incentives associated with reward schemes riley 22 has analyzed the war of attrition and auctions dixit 7 has considered strategic commitments in contests with different applications these are only a part of the literature on the theory of contests despite the vast literature however the effects of asymmetries between players have not been clarified except by harris and vickers 11 who analyze in a patent race model the strategic consequences of asymmetries the purpose of this paper is to examine the effects of asymmetries between two players on individual and total effort levels in a model with a logit form probability of winning function effort levels expended by the players deserve attention effort in a rent seeking contest is interpreted as social costs and thus total effort level is a measure of economic efficiency effort in an r d contest is interpreted as r d expenditures and thus effort levels determine the expected date of invention we focus on asymmetries between the players resulting from their different valuations of the prize their different abilities to convert effort into probability of winning or both such asymmetries are common in contests for example people in different locations may receive different

why hasn t tax competition triggered a race to the bottom some quantitative lessons from the eu abstract the integration of european financial markets in the early 1980s created an environment of near perfect capital mobility across countries that had harmonized indirect taxes but maintained large differences in factor taxes the years that followed witnessed several rounds of competition in capital taxes with puzzling results instead of the dreaded race to the bottom in capital taxes the uk lowered its capital tax to a rate closer to those of france germany and italy while capital taxes changed slightly in these countries the uk increased its labor tax marginally but the other countries increased theirs sharply this paper shows that these results are consistent with the quantitative predictions of a dynamic neoclassical general equilibrium model of tax competition that incorporates the key international externalities of tax policy operating via relative prices wealth distribution and fiscal solvency tax competition is modeled as a one shot game over time invariant capital taxes with dynamic payoffs relative to a status quo calibrated to european data the calibration is preceded by an empirical analysis that shows that the relationship linking taxes to labor supply and the investment rate in the model are in line with empirical evidence and that domestic taxes seem to respond to foreign taxes the solutions of the games show that when countries compete over capital taxes adjusting labor taxes to maintain fiscal solvency there is no race to the bottom and the nash equilibrium is close to observed taxes in contrast if consumption taxes adjust to maintain fiscal solvency competition over capital taxes triggers a race to the bottom but this outcome entails large welfare gains surprisingly the gains from coordination are small in all of these experiments

state investment tax incentives a zero sum game abstract over the past four decades state investment tax incentives have proliferated this emergence of state investment tax credits itc and other investment tax incentives raises two important questions 1 are these tax incentives effective in achieving their stated objective to increase investment within the state 2 to the extent these incentives raise investment within the state how much of this increase is due to investment drawn away from other states to begin to answer these questions we construct a detailed panel dataset for 48 states for 20 years the dataset contains series on output and capital their relative prices and establishment counts the effects of tax variables on capital formation and establishments are measured by the jorgensonian user cost of capital that depends in a nonlinear manner on federal and state tax variables cross jurisdictional differences in state investment tax credits and state corporate tax rates entering the user cost combined with a panel that is long in the time dimension are key to identifying the effectiveness of state investment incentives two models are estimated the capital demand model is motivated by the first order condition for a profit maximizing firm and relates at the state level the capital output ratio to the relative user cost of capital the twin counties model exploits both the spatial breaks discontinuities in tax policy at state borders and our panel dataset to relate at the county level the relative user cost to the location of manufacturing establishments using the capital demand model we find that own state capital formation is substantially increased by tax induced reductions in the own state price of capital and more interestingly substantially decreased by tax induced reductions in the price of capital in competitive states similarly using our twin counties model we find that county manufacturing establishment counts around state borders are higher on the side of the border with the lower price of capital but the difference is economically small suggesting that establishments are much less mobile than overall capital extensions of the capital demand model also reveal that state capital tax policy appears to be a zero sum game among the states in that an equiproportionate increase in own state and competitive states user costs tends to have no effect on own state capital formation

nash equilibria in models of fiscal competition abstract this paper analyzes nash equilibria in a simple model of an economy with jurisdictions engaging in fiscal competition small number nash equilibria in which tax rates are the strategic variables are shown not to coincide with nash equilibria in which public expenditure levels are the strategic variables

decentralization and international tax competition abstract this paper models tax competition between two countries that are divided into regions in the first stage of the game the strategy variable for each country is the division of a continuum of public goods between central and regional government provision in the second stage the central and regional governments choose their tax rates on capital a country s decentralization level serves as a strategic tool through its influence on the mix of horizontal and vertical externalities that exists under tax competition in contrast to standard tax competition models decentralizing the provision of public goods may improve welfare

advertising competition under consumer inertia we construct a multistage game theoretic model of advertising and price competition in a differentiated products duopoly in which proportions of consumers exhibit latent inertia in favor of repeat purchase advertising simultaneously plays the dual role in reducing such inertia through awareness and enhancing perceived brand value persuasion we derive the advertising price cross effects and provide a theoretical reconciliation of the longstanding debate in the marketing literature regarding the impact of advertising on price sensitivity we characterize the nature of equilibria under symmetry and show that when a large proportion of consumers exhibit inertial tendencies then a multiplicity of equilibria exists marketing implications and comparative statics are discussed numerical simulations for asymmetric firms are presented wherein we show that advertising is not a useful competitive tool for small firms however advertising spending by the large firm provides a halo effect for the average prices in the category which has a positive externality on the small firm s profits in the absence of the small brand advertising larger brand shares encourage firms to allocate higher expenditures on advertising to enhance the perceived value of their brand which in turn shore up the average prices in the industry from which all firms benefit

tax competition among u s states racing to the bottom or riding on a seesaw abstract dramatic declines in capital tax rates among u s states and european countries have been linked by many commentators to tax competition an inevitable race to the bottom and underprovision of local public goods this paper analyzes the reaction of capital tax policy in a given u s state to changes in capital tax policy by other states our study is undertaken with a novel panel data set covering the 48 contiguous u s states for the period 1965 to 2006 and is guided by the theory of strategic tax competition the latter suggests that capital tax policy is a function of foreign out of state tax policy preferences for government services and home state and foreign state economic and demographic conditions the slope of the reaction function the equilibrium response of home state to foreign state tax policy is negative contrary to casual evidence and many prior empirical studies of fiscal reaction functions this result which stands in contrast to most published findings is due to two critical elements that allow for delayed responses to foreign tax changes and responses to aggregate shocks omitting either of these elements leads to a misspecified model and a positively sloped reaction function our results suggest that the secular decline in capital tax rates at least among u s states reflects synchronous responses among states to common shocks rather than competitive responses to foreign state tax policy while striking given prior empirical findings these results are fully consistent with the implications of the theoretical model developed in this paper and presented elsewhere in the literature rather than racing to the bottom our findings suggest that states are riding on a seesaw consequently tax competition may lead to an increase in the provision of local public goods and policies aimed at restricting tax competition to stem the tide of declining capital taxation are likely to be ineffective

the strategic equivalence of rent seeking innovation and patent race games abstract we establish the strategic equivalence of a variety of rent seeking contests innovation tournaments and patent race games the results allow us to disentangle negative and positive externalities and to apply theorems and results intended for rent seeking games to other games and vice versa we conclude with several examples that highlight the practical utility of our results

an empirical analysis of intergovernmental tax interaction the case of business income taxes in canada both federal and provincial governments in canada levy corporate taxes on busi nesses in their jurisdictions which potentially gives rise to horizontal and vertical tax exter nalities within the federation using a simple model of interdependent tax choices we estimate tax setting functions for the federal government ontario quebec and an aggregate of the remaining eight provinces we find evidence of significant vertical and horizontal tax inter actions provincial tax rates respond negatively to the federal tax rate while at least some provinces increase their tax rates in response to increases in the tax rates of other provinces

a theory of interregional tax competition a general equilibrium model is constructed to study tax competition where local governments compete for capital by holding down property tax rates and public expenditure levels an exact definition of tax competition is provided and both the existence and nonexistence of tax competition are shown to be theoretically possible it is argued however that tax competition must occur under empirically reasonable conditions inefficiency in public production is also explicitly modeled the amount of capital used to produce a given level of public service output is shown to be greater than that which is required to minimize costs evaluated at the prices facing private firms

the structure of equilibria in market share attraction models a market share attraction model of competitive effort allocation by two firms is formulated as a constant sum two person game the dependence of optimal competitive effort allocations on factors such as gross profit margins relative effectiveness of effort and attraction elasticity of effort is studied two versions of the model are developed in the first version effort budgets of both competitors are exogenously fixed in the second the competitors each choose both budget levels and allocations in each version of the model an important function of the parameters called the competitive advantage ratio indicates when it is optimal to either increase or decrease effort allocated in a market in response to changes in various measures of effectiveness implications of differences in the cost associated with each competitor s budget on equilibrium allocations are derived

international tax competition and the deficit bias i analyze the dynamic effects of tax competition on public budget deficits i find that stronger tax competition leads to a fiscal deficit bias at the early stages of financial liberalization when countries differ in terms of capital mobility further liberalization leads to external imbalances and diverging fiscal deficits while corporate tax rates converge consistent with theory i find that stronger tax competition increases deficits in a sample of oecd countries controlling for tax revenues and other standard determinants of fiscal deficits jel e62 f62

the impact of the corporate income tax evidence from state organizational form data abstract by taxing the income of corporate firms at a different rate than non corporate firms taxes can play an important role in a firm s choice of organizational form the sensitivity of the organizational form decision to tax rates provides a key indicator of the distortion created by the corporate income tax this paper uses new cross sectional data on organizational form choices across states compiled in the census of retail trade to estimate this sensitivity the results document a significant impact of the relative taxation of corporate to personal income on the share of real economic activity that is done by corporations and that the impact is many times larger than has been found in the previous empirical literature based on time series data the results show little impact however on the actual operations of firms such as their labor intensity wages and the like they do indicate that firms are able to exploit the progressivity of the corporate income tax system by dividing into numerous firms

two player asymmetric contests with ratio form contest success functions i examine players equilibrium effort levels in two player asymmetric contests with ratio form contest success functions i first characterize the nash equilibrium of the simultaneous move game i show that the equilibrium effort ratio is equal to the valuation ratio and that the prize dissipation ratios for the players are the same i also show that the prize dissipation ratio for each player is less than or equal to the minimum of the players probabilities of winning at the nash equilibrium and thus never exceeds a half then i examine how the equilibrium effort ratio the prize dissipation ratios and the players equilibrium effort levels respond when the players valuations for the prize or their abilities change jel d72 c72 i introduction a contest is a situation in which players compete with one another by expending irreversible effort to win a prize typical examples are various types of rent seeking contests competition among firms to win a monopoly rent secured under government protection or by a government procurement contract competition between domestic and foreign firms to obtain governmental trade policies favorable to them competition among firms to acquire a rent generated by rights of ownership to an import quota and competition among firms to capture rents created by governmental decisions to establish tariffs or other trade barriers other examples of contests include auctions patent races research and development r d competition among firms litigation competition for jobs among job candidates competition among candidates to win promotion to higher ranks election campaigns between political candidates and competition between local governments to invite business firms government institutions or government owned corporations into their districts naturally due to their prevalence and importance in economies such contests have been studied by many economists loury 1979 lee and wilde 1980 tullock 1980 rogerson 1982 rosen 1986 appelbaum and katz 1987 dixit 1987 hillman and riley 1989 hirshleifer 1989 ellingsen 1991 nitzan 1991 1994 krishna and morgan 1997 che and gale 1998 hurley and shogren 1998 and konrad 2000 to name a few in this vast literature on the theory of contests one of the main issues is how much effort do the players exert in pursuit of the prize indeed it is of great interest because the players effort levels determine the profitability of the players engaging in the contest and in some cases they are revenues collected by the contest organizer or bribes given to government officials furthermore they account for other important outcomes of the contest for example in a rent seeking contest efforts expended by the players are viewed as social costs due to rent seeking activities so that total effort level is a measure of economic efficiency in an r d contest effort levels expended by the players these are r d expenditures of the firms determine the expected date of invention this article also addresses the issue how much effort do the players exert in pursuit of the prize but it differs from previous research by dealing with contests with ratio form contest success functions 1 specifically the novelty of this article is to consider two player asymmetric contests in which each player s probability of winning is a function of the ratio of the two players effort levels two player contests with ratio form contest success functions or two player contests that can be best modeled with ratio form contest success functions are easily observed in the real world examples include various types of two player rent seeking contests litigation between a plaintiff and a defendant election campaigns between two parties or candidates and r d competition between two firms consider for example a rent seeking contest in which two firms potential monopolists compete with each other to win a government monopoly franchise contract

income taxation and the diversity of consumer goods a political economy approach after tax income inequality has risen since the mid 1990s as increases in market income inequality have not been offset by greater fiscal redistribution we argue that the substantial increase in the diversity of consumer goods has mitigated mounting political pressures for redistribution within a probabilistic voting framework we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income then an increase in goods diversity can reduce the political equilibrium tax rate focusing on oecd countries we find empirical support for both the model s micro political foundations and the implied relation between goods diversity and fiscal policy outcomes

common factors and common breaks in panels an empirical investigation abstract unobserved common factors and common breaks are two important features in empirical studies using large panels recently baltagi feng and kao 2016 2019 extended pesaran s 2006 common correlated effects cce approach by allowing for common breaks and endogenous regressors in large heterogeneous panels in this note we empirically investigate these estimators and compare them with cce and bai s 2009 interactive fixed effects ife estimators in the context of china s provincial infrastructure investment

budget spillovers and fiscal policy interdependence evidence from the states abstract this paper formalizes and tests the notion that states expenditures depend on the spending of similarly situated states we find that even after allowing for fixed state effects year effects and common random shocks among neighbors a state government s level of per capita expenditure is positively and significantly affected by the expenditure levels of its neighbors ceteris paribus a one dollar increase in a state s neighbors expenditures increases its own expenditure by over 70 cents

wagner s hypothesis in time series and cross section perspectives evidence from real data for 115 countries internationally comparable data on income and government expenditure for 115 countries covering the period 1950 80 are used to assess the validity of wagner s hypothesis individual country time series data and several intercountry cross sections are studied besides a tremendous diversity in the position for various countries the results indicate that while there is support for the hypothesis in some time series data sets such support is lacking in most cross section estimates much of the support for the hypothesis reported in many earlier studies therefore was probably due to either use of limited samples or inadequate data comparability across the observations studied copyright 1987 by mit press

competing land uses and fossil fuel and optimal energy conversion rates during the transition toward a green economy under a pollution stock constraint abstract we study the transition to a carbon free economy in a model with a polluting non renewable resource and a clean renewable resource transforming primary energy into ready to use energy services is costly and more efficient energy transformation rates are more costly to achieve renewable energy competes with food production for land and the food productivity of land can be improved at some cost to avoid catastrophic climate damages the pollution stock is mandated to stay below a given cap when the economy is not constrained by the cap the efficiency of energy transformation increases steadily until the transition toward the ultimate green economy when renewable energy is exploited its land use rises at the expense of food production food productivity increases together with the land rent but food production drops the food and energy prices increase and renewables substitute for non renewable energy during the constrained phase the economy follows a constant path of prices quantities efficiency rates food productivity and land rent a phenomenon we call the ceiling efficiency paradox

rent seeking contest when the prize increases with aggregate efforts the objective of this article is to investigate contests in which efforts are productive tullock s standard rent seeking model is extended by making the rent itself increase with the aggregate efforts a positive externality is thereby introduced into the contest because a contender s private effort in quest of the rent generates a benefit for other contenders coupled with a negative externality presented in the standard rent seeking model the net effect on the social efficiency of the contest is a priori ambiguous it is shown that the extended contest generates socially wasteful excessive aggregate efforts

horizontal and vertical indirect tax competition theory and some evidence from the usa this paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes and estimates equations informed by the theory on a panel of us state and federal excise taxes on cigarettes and gasoline we also examine the role played by smuggling the results are generally consistent with the theory when the characteristics of the markets for the goods are taken into account for neither good do federal excise taxes affect state taxes taxes in neighbouring states have a significant and large effect in the case of cigarettes and a much weaker effect in the case of gasoline we also find that in the setting of cigarette taxes concerns about cross border shopping play a more important role than concerns about smuggling

democrats republicans and taxes evidence that political parties matter i estimate the influence of political parties on state tax burdens over a forty year period 1960 2000 holding constant a large number of state and voter characteristic variables i find that i tax burdens are higher when democrats control the state legislature compared to when republicans are in control ii the political party of the governor has little effect after controlling for partisan influences in the state legislature i explain how both findings are consistent with median voter theory my results suggest that after five years of democratic control of the legislature state government would be approximately 3 to 5 percent larger than if republicans controlled the legislature during that same period with the better specifications producing estimates in the higher end of this range

do local government fiscal spillovers exist evidence from counties municipalities and school districts abstract numerous theories posit that the fiscal decisions of one jurisdiction influence the fiscal decisions of its neighbors the main contribution of this paper is to address empirical difficulties in testing for spillovers using a regression discontinuity design on a newly collected dataset i utilize close elections from this large dataset of local referenda in ohio to isolate the effect of exogenous increases in taxation and spending of one jurisdiction on neighbors fiscal decisions for all jurisdictional types and referenda revenue sources bonds income property and sales tax there is no evidence of spillovers and relatively small effects can be ruled out

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

why large scale bioenergy production on marginal land is unfeasible a conceptual partial equilibrium analysis a transparent and conceptual partial equilibrium model of global land use is used to explore long term effects of large scale introduction of bioenergy under different policy cases the transparency of the model and the consideration of clear cut policies provides a clear picture of how main mechanisms of land use competition work and how they influence the food and bioenergy systems the model is subjected to a detailed characterization in which parameters critical to the results and conclusions are detected and their impacts depicted a large scale introduction of bioenergy would raise food prices in all cases scenarios investigated and relative price increases of extensively produced crops would be at least twice as high as compared to intensively produced crops banning production of bioenergy from the most productive land limiting production to marginal land would reduce this price impact however we show that bioenergy is unlikely to ever be produced on any commercial scale only on land of low productivity the economic incentives would be strong for owners of more productive land to grow bioenergy anyway and out compete the more costly production on low yielding land large scale deforestation would become attractive in response to increased bioenergy demand especially for extensive production systems such as grazing

commodity tax competition between member states of a federation equilibrium and efficiency we first describe regional market equilibria whereupon consumers of each region allocate their purchases of private goods between domestic and nondomestic ones according to the structure of relative prices taxes and transportation costs next regional optimal tax levels and public good quantities are derived the tax of the other region being held constant fiscal competition arises from the ability of one region in choosing its tax to alter the tax base of the other

fiscal competition and public debt the existing theoretical literature on fiscal competition has to a large extent ignored the role of government debt as a determinant of taxes and productive public spending we develop a simple model of fiscal competition with government borrowing if a default on government debt is no option initial debt levels play no role in fiscal competition this neutrality result is overturned when a default is possible a government that is constrained in its borrowing due to a possible default responds optimally by lowering spending on durable public infrastructure which in turn induces more aggressive tax setting a rise in exogenous firm mobility reinforces the link between legacy debt and fiscal competition our model may help explain the observation that highly indebted countries in europe have decreased corporate tax rates over proportionally our model may also be useful for evaluating decentralization reforms in which the power to tax firms is devolved to lower levels of overnments which differ in their initial debt levels

does manufacturer advertising crowd in or crowd out retailer advertising an application of an endogenous prize contest with asymmetric players when a manufacturer advertises what is the impact on retailer advertising i analyze a contest model of advertising where total advertising by the manufacturer and by retailers determines market size and the relative level of advertising by each retailer determines market share if retailers are symmetric i show that there is a crowding in effect so increased manufacturer advertising increases retail advertising but if one retailer is stronger then marginal increases in manufacturer advertising have a crowding out effect on retailer advertising while sufficiently large increases have a crowding in effect by jump starting competition between retailers for the larger market furthermore asymmetric abilities in such contests can lead the weaker player to effectively drop out of the contest thereby undermining the ability of increased prizes to increase effort by intensifying competition

do countries compete over corporate tax rates this paper tests whether oecd countries compete with each other over corporate taxes in order to attract investment we develop two models with firm mobility countries compete only over the statutory tax rate or the effective average tax rate while with capital mobility countries compete only over the effective marginal tax rate we estimate the parameters of reaction functions using data from 21 countries between 1983 99 we find evidence that countries compete over all three measures but particularly over the statutory tax rate and the effective average tax rate this is consistent with a belief amongst governments that location choices by multinational firms are discrete we also find evidence of concave reaction functions consistent with the model outlined in the paper

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

between anarchy and leviathan a note on the design of federal states abstract recent research suggests a rationale for the autonomy retained by federal states lower and intermediate level governments by encouraging interjurisdictional competition federal structures constrain the pursuit by public officials of private objectives inconsistent with the public weal but using federal structures to achieve this end has a cost the more decentralized a nation s public sector the more likely that some of the externalities generated by the provision of public goods and services will be ignored this note investigates the balance between the costs and benefits of decentralization that must be struck by a federal state s designers

interacting cobweb markets abstract we enrich the classical cobweb framework by allowing producers to enter different markets the market entry decision is repeated every period and depends on the markets historical profit differentials as a result the number of producers in a market and thus also a market s total supply vary over time analytical and numerical investigations of our four dimensional nonlinear model indicate that interacting cobweb markets may contribute to the strong cyclical price motion observed in many commodity markets we furthermore find that endogenous dynamics may either set in via a flip or a neimark sacker bifurcation interestingly the latter scenario is prevalent if producers are sufficiently risk averse

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

an evaluation of alternative measures of corporate tax rates abstract this paper examines the ability of financial statement measures of average and marginal tax rates mtr to capture tax attributes utilizing firm level tax and financial data the results suggest commonly used average tax rate measures provide little insight about statutory tax burdens and may introduce substantial bias into analyses of tax incidence financial statement based proxies for mtr particularly those based on simulation methods are found to perform well in estimating current year tax rates both current year and present value mtr are found to be highly correlated with an easily constructed binary proxy of firms tax status

competitive dynamic advertising a modification of the case game abstract in this paper we consider a modified version of the advertising differential game of case 1979 we derive non cooperative nash equilibria for open loop controls as well as for feedback strategies we consider finite and infinite planning horizons the feedback equilibrium is shown to be robust against stochastic disturbances of the state equation

dynamic fiscal competition a political economy theory abstract i develop a political economy theory of dynamic fiscal competition via public spending and debt with internationally mobile capital strategic policies generate two cross border externalities that voters in each country fail to internalize 1 an increase in public spending that bolsters capital accumulation but also 2 a race to the top in public debt which crowds out capital the relative size of these two externalities varies with the number of financially integrated countries and interacts with the domestic political conflict between young and old voters despite residence based taxation capital tax rates are lower under strategic policies than under coordination furthermore they may decline with financial integration strategic policies lead to lower long run output and welfare relative to coordination but are preferred by subsequent generations of voters if the number of financially integrated countries is low or the political weight of the young is high

stochastic dynamic market share attraction games abstract a dynamic oligopoly model having a market share attraction form is formulated as a stochastic sequential game market shares evolve randomly over time according to dynamics that incorporate a general lag structure the model incorporates goodwill as a measure of current and past effort decisions qualitative properties of closed loop equilibrium strategies are developed by establishing a relationship between an equilibrium point of the dynamic stochastic game and an associated static one period game journal of economic literature classification number c73

how much do taxes discourage incorporation the double taxation of corporate income should discourage firms from incorporating we investigate the extent to which the aggregate allocation of assets and taxable income in the united states between corporate and noncorporate firms responds to the size of this tax distortion during the period 1959 1986 in theory profitable firms should shift out of the corporate sector when the tax distortion is large and conversely for firms with tax losses our empirical results provide strong support for these forecasts and imply that the resulting excess burden equals 16 percent of business tax revenue one of the most basic distortions created by the double taxation of corporate income in the united states is the disincentive to incorporate even in most countries with integrated or partially integrated tax systems there are differential taxes across organizational forms however obvious this distortion may be most articles investigating the distortions created by the corporate tax have taken as exogenous a firm s choice whether or not to incorporate assuming for example that some industries are inherently corporate while others are inherently noncorporate a variety of nontax factors described below can certainly influence a firm s choice of organizational form causing some to favor incorporating and others not but are these nontax factors so dominant that taxes do not in practice influence a firm s choice of organizational form as gravelle and kotlikoff 1989 1993 emphasize tax induced changes in firms choices of organizational form in principle can create large excess burdens the size of these excess burdens in practice depends on the extent to which firms respond to these tax incentives in this article we calculate how the tax distortion discouraging firms from incorporating has varied over time then estimate the extent to which the allocation of assets and taxable income between corporate and noncorporate

a cobweb model of land use competition between food and bioenergy crops we present a model of interacting cobweb markets and apply it to land use competition between food and bioenergy crops in our model the markets are interlinked on the supply side by the limited availability of land therefore instabilities are transferred between the markets and we find that bioenergy demand affects food price volatility the agents in the model have heterogeneous production capacities representing variation in global land quality when we allow agents to choose price predictor we find that a more sophisticated but costly predictor is concentrated to some key parcels of land which enables the system to reduce instability significantly the system can also be brought closer to a stable state by introducing costs for changing production type but it may then be shifted away from the optimum situation predicted by the corresponding equilibrium model

an unbalanced spatial panel data approach to us state tax competition abstract this paper assesses spatial competition in excise taxation among us states over the time period 1975 1999 we estimate the slope and shifters of the tax reaction curves using spatial panel data methods recently proposed by kapoor et al in press kapoor m kelejian h h prucha i r in press panel data models with spatially correlated error components j econ

jeux sans frontieres tax competition and tax coordination when countries differ in size closer international integration is putting increasing pressure on existing national tax structures this paper uses a simple two country model to address a range of consequent policy concerns focusing particularly on the role of country size differences in size exacerbate the inefficiency from noncooperative behavior harming both countries the smaller country loses from harmonization to any tax rate between those set in the noncooperative equilibrium but both countries gain from the imposition of a minimum tax anywhere in that range the fully optimal response to freer cross border trade however may be to do nothing jel h20 h77