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Feedback Nash equilibria in optimal taxation problems

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Central European Journal of Mathematics

Abstract

A well-known result in public economics is that capital income should not be taxed in the long run. This result has been derived using necessary optimality conditions for an appropriate dynamic Stackelberg game. In this paper we consider three models of dynamic taxation in continuous time and suggest a method for calculating their feedback Nash equilibria based on a sufficient condition for optimality. We show that the optimal tax on capital income is generally different from zero.

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Authors and Affiliations

  1. Institute of Mathematics and Informatics, Bulgarian Academy of Sciences, Sofia, Bulgaria

    Mikhail Krastanov

  2. Department of Mathematics and Informatics, Sofia University, Sofia, Bulgaria

    Rossen Rozenov

Authors
  1. Mikhail Krastanov
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  2. Rossen Rozenov
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Correspondence to Mikhail Krastanov.

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Krastanov, M., Rozenov, R. Feedback Nash equilibria in optimal taxation problems. centr.eur.j.math. 7, 757–774 (2009). https://doi.org/10.2478/s11533-009-0040-5

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  • DOI: https://doi.org/10.2478/s11533-009-0040-5

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