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Tax effects on equilibrium locations

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Abstract

Using a Hotelling-type model with elastic demand functions and spatial discrimination, we show that, in contrast with previous results obtained with inelastic demand functions, neither ad valorem nor unit taxes are neutral for equilibrium locations. In fact, the higher is the tax rate the lower is the equilibrium distance between firms.

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Authors and Affiliations

  1. Catholic University of Milan, Largo A. Gemelli 1, 20123, Milan, Italy

    Stefano Colombo

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  1. Stefano Colombo
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Correspondence to Stefano Colombo.

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Colombo, S. Tax effects on equilibrium locations. J Econ 101, 267–275 (2010). https://doi.org/10.1007/s00712-010-0152-1

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  • DOI: https://doi.org/10.1007/s00712-010-0152-1

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