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Profit Tax Evasion Under Oligopoly With Endogenous Market Structure

Goerke, Laszlo and Runkel, Marco

Abstract:

This note investigates the impact of profit tax evasion on firms' output decisions in a Cournot oligopoly setting in which the market structure is determined endogenously. It is shown that tax evasion intensifies market entry and raises aggregate output, while production of each incumbent firm decreases. Therefore, tax evasion choices affect activity decisions and an evadable profit tax distorts the market outcome.

Citation

Goerke, Laszlo and Runkel, Marco (2006), Profit Tax Evasion Under Oligopoly With Endogenous Market Structure, National Tax Journal, 59:4, pp. 851-57

DOI: dx.doi.org/10.17310/ntj.2006.4.06