Extension of Long-Staehler’s Model on Optimal Export Tax in the Case of Privatization

Tsaur-Chin Wu¹, Jeng-Wen Lin²

¹Department of Public Finance, Feng Chia University, Taichung, Taiwan.
²Department of Civil Engineering, Feng Chia University, Taichung, Taiwan.

DOI: 10.4236/me.2015.65053                

Abstract

This paper extends Long and Staehler’s model and studies optimal export tax in the case of privatization. The authors find that optimal export tax increases with the degree of privatization if product differentiation exists. The authors provide a counterexample to Long and Staehler’s model and reach a different conclusion. This finding emphasizes that the relationship between the variables of optimal export tax and conditions of asymmetric cost and product differentiation is quite different from Long and Staehler’s model. Since optimal export tax is endogenous in the model, the authors also consider the potential endogeneity of privatization decision, which is an important issue in a traditional mixed duopoly analysis.

Keywords

Cost Asymmetry, Privatization, Product Differentiation, Optimal Export Tax

Conflicts of Interest

The authors declare no conflicts of interest.

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