Taxation and the control of international oligopoly

Paper number: 95/06

Paper date: June 1995

Year: 1995

Paper Category: Discussion Paper


Gareth D. Myles

University of Exeter


The paper shows how the differing incidence of specific and ad valorem taxation in imperfectly competitive markest can be exploited to control international oligopoly. If countries act cooperatively, the tax instruments used in combination achieve the same outcome, either the first-best or the constrained second-best, as direct production control. When a single country regulates the oligopoly, circumstances are shown to exist in which taxation is superior to production control.

JEL Classification numbers: D43, F12, H21.
Keywords: Taxation, international oligopoly, first-best, constrained second-best.

Correspondence: Department of Economics, Amory Building, University of Exeter, Exeter EX4 4RJ.

Thanks are due to David de Meza.