Evolutionary competition and profit taxes: market stability versus tax burden
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Beschreibung
The seminal cobweb model by Brock and Hommes reveals that fixed-point dynamics may turn into increasingly complex dynamics as firms switch more quickly between competing expectation rules. While policy-makers may be able
to manage such rational routes to randomness by imposing a proportional profit tax, the stability-ensuring tax rate may cause a very high tax burden for firms. Using a mix of analytical and numerical tools, we show that a rather small
profit-dependent lump-sum tax may even be sufficient to take away the competitive edge of cheap destabilizing expectation rules, thereby contributing to market stability.
Autor*in
Noemi Schmitt
Themen in »Evolutionary competition and profit taxes: market stability versus tax burden«
Cobweb models discrete choice approach intensity of choice profit taxes stability analysis tax burden