Size effect, neighbour effect and peripheral effect in cross-border tax games

Xin Liu

This paper analyses a game theoretic model of tax competition in a system where tax authorities are revenue optimisers and countries are differentiated by size. The model accommodates more than two countries. In equilibrium, larger countries set higher tax rates non-cooperatively. By applying the Hotelling linear model, this paper gives examples where the size effect, neighbourhood effect, and peripheral effect coexist and push up the tax rate in equilibrium.

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Year of publication:	2014
Authors:	Liu, Xin
Publisher:	Kiel : Kiel Inst. for the World Economy
Subject:	Tax competition \| cross-border shopping \| Nash equilibrium \| peripheral effects \| Steuerwettbewerb \| Nash-Gleichgewicht \| Periphere Region \| Periphery \| Spieltheorie \| Game theory \| Steuerwirkung \| Tax effects \| Konsumentenverhalten \| Consumer behaviour