Market size, product differentiation and bidding for new varieties

Jie Ma, Ian Wooton

Research output: Contribution to journalArticle

Abstract

We analyse a firm's investment decision in a regional economy composed of two countries. The firm already manufactures a horizontally differentiated good in the region and we determine the firm's equilibrium location choice for the new good and the welfare consequences of fiscal competition between the two countries. We find that the firm's location decision is efficient. Fiscal competition does not affect the location of production but merely redistributes rents between the firm and the taxpayers of the host country. As far as we know, the tax competition literature has not previously addressed the issue of product differentiation.
LanguageEnglish
Number of pages31
JournalInternational Tax and Public Finance
Publication statusAccepted/In press - 28 Jun 2019

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Product differentiation
Bidding
Market size
Fiscal competition
Tax competition
Firm location
Location choice
Investment decision
Firm investment
Host country
Rent
Regional economy
Location decision

Keywords

  • FDI
  • product differentiation
  • import substitution
  • MNEs
  • market size

Cite this

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Market size, product differentiation and bidding for new varieties. / Ma, Jie; Wooton, Ian.

In: International Tax and Public Finance, 28.06.2019.

Research output: Contribution to journalArticle

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