Evolutionary competition and profit taxes: market stability versus tax burden

Arbeitspapier

The seminal cobweb model by Brock and Hommes reveals that fixed-point dynamics may turn into increasingly complex dynamics as firms switch more quickly between competing expectation rules. While policy-makers may be able to manage such rational routes to randomness by imposing a proportional profit tax, the stability-ensuring tax rate may cause a very high tax burden for firms. Using a mix of analytical and numerical tools, we show that a rather small profit-dependent lump-sum tax may even be sufficient to take away the competitive edge of cheap destabilizing expectation rules, thereby contributing to market stability.

Object Details

• ISBN: 978-3-943153-21-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BERG Working Paper Series ; No. 104

Classification and Topics

• Classification: Wirtschaft ; Expectations; Speculations ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Agriculture: Aggregate Supply and Demand Analysis; Prices
• Subject: cobweb models ; discrete choice approach ; intensity of choice ; profit taxes ; tax burden ; stability analysis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schmitt, Noemi ; Westerhoff, Frank
• Event: Veröffentlichung
• (who): Bamberg University, Bamberg Economic Research Group (BERG)
• (where): Bamberg
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/117336
• Last update: 10.03.2025, 11:45 AM CET