Title

Profitable cost increases and the shifting of taxation : equilibrium response of markets in oligopoly

Document Type

Working paper

Source Publication

The Warwick Economics Research Paper Series (TWERPS)

Publication Date

4-1-1985

Volume

260

First Page

1

Last Page

33

Publisher

Department of Economics, The University of Warwick

Abstract

This paper considers the conjectural variations model of oligopoly and introduces a shift in its equilibrium solution : a cost-side shift, such as a change in technology or input prices, or the introduction of excise tax. The equilibrium effects of this cost-displacement are then found, deriving and examining explicit expressions for the resulting movements in individual outputs and hence in price, profits and market structure. The main motivation we offer for the exercise is methodological : to derive, for the model adopted, certain industrial-organization results of general interest and applicability, which we then put to work mostly in a more specific public finance context. The results we are referring to are, very simply, the comparative statics (of our model) of oligopoly, in response to changes in costs. It is indeed surprising that the problem is not one which has been treated systematically in the literature except for particular cases, such as special functional forms and / or symmetric industry.

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Recommended Citation

Seade, J. (1985). Profitable cost increases and the shifting of taxation: Equilibrium response of markets in oligopoly. The Warwick Economics Research Paper Series (TWERPS), 260, 1-33. Retrieved from http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp_260.pdf