Tax Analysis in an Oligopoly Model

In this article we analyze taxation using the conjectural variations model of oligopoly. We demonstrate the way in which the incidence of a tax depends on the pattern of firm interaction. The results obtained have important implications for the controversy surrounding the question of whether a tax on corporate income can be overshifted. We also study normative aspects of taxation. The focus here is on the errors that can arise in excess burden calculations when incorrect assumptions on market structure are made.