Abstract
The purpose of this paper is to investigate the effects of variable population densities, composite transportation costs, and consumer preferences on tax competition. A simple formula for the number of cross border shoppers is derived which yields explicit expressions for composite reaction functions. The NASH equilibrium problem may have zero or several solutions. The major contribution of this paper is that by considering more realistic forms of the three variables, population densities, composite transportation costs, and consumer preferences, one can obtain major structural changes in the NASH Equilibrium (NE) outcome. 1) The existence of a unique NE is no longer guaranteed, 2) the size of the region is no longer significant in revenue maximization schemes, 3) the amount of cross border shopping is dependent on all three variables, 4) evolution in any or all three variables, can be PARETo-improving if, the evolution of either of these variables is correlated with the evolution of the others, 5) tax coordination is advantageous irrespective of the size of each region. The implication of these findings is that the best strategy is tax harmonization.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
