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International Tax and Public Finance

, Volume 12, Issue 6, pp 695–712 | Cite as

Tax Principles, Product Differentiation and the Nature of Competition

  • Nigar Hashimzade
  • Hassan Khodavaisi
  • Gareth D. Myles
Article

Abstract

We analyze the choice between the origin and destination principles of taxation when there is product differentiation and Bertrand competition. If taxes are redistributed to consumers and demand is linear the origin principle dominates the destination principle whatever the degree of product differentiation and extent of economic integration. With nonlinear demand the origin principle dominates if there is sufficient economic integration. When the social value assigned to tax revenue is higher than the private value, the destination principle dominates for intermediate values of product differentiation and economic integration. The same results are also shown to hold with Cournot competition.

Keywords

commodity taxation imperfect competition Bertrand competition Cournot competition 

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Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  • Nigar Hashimzade
    • 1
  • Hassan Khodavaisi
    • 1
  • Gareth D. Myles
    • 2
  1. 1.School of Business and EconomicsUniversity of ExeterUK
  2. 2.School of Business and EconomicsUniversity of Exeter and Institute for Fiscal StudiesUK

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