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on Contract Theory and Applications |
| By: | Ruud A. de Mooij; Sebastian Beer |
| Abstract: | This paper develops a simple model to explore whether a higher detection probability for offshore tax evaders—e.g. because of improved exchange of information between countries and/or due to digitalization of tax administrations—renders it optimal for governments to introduce a voluntary disclosure program (VDP) and, if so, under what terms. We find that if the VDP is unanticipated, it is likely to be optimal for a revenue-maximizing government to introduce a VDP with relatively generous terms, i.e. a low or even negative penalty. When anticipated, however, the VDP is neither incentive compatible nor optimal, as it induces otherwise compliant taxpayers to evade tax. A VDP can then only be beneficial if tax evasion induces an external social cost beyond the direct revenue foregone, e.g., due to adverse effects on overall tax morale. In contrast to the common view that VDPs should come along with additional enforcement effort, we find that governments should relax enforcement if the VDP itself provides more powerful incentives to come clean. |
| Keywords: | Tax evasion; Voluntary disclosure program; Tax amnesty |
| Date: | 2023–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/006&r=cta |
| By: | Luca Sandrini (Research Centre of Quantitative Social and Management Sciences, Budapest University of Technology and Economics) |
| Abstract: | This article shows that the usual result of full adoption of a superior technology induced by pure royalty licensing may not hold when firms have different production technologies. By modeling a licensing game with an external innovator offering per-unit royalty contracts to downstream firms, this article shows that full adoption of the innovation occurs only if i) the new technology is sufficiently more efficient than the best one available in the market or ii) if the firms have similar efficiency levels. Moreover, I disentangle two distinct forces that influence the innovator's choice: a price effect (PE) and a market share effect (MSE). The former highlight the asymmetry in willingness to pay for the new technology. The inefficient firms, which benefit the most from the cost-reducing innovation, are willing to pay a higher price than their efficient rivals to become licensees. The latter illustrates the innovator's aim to maximize the volume of royalties collected by licensing to many firms. When PE dominates MSE, the patent holder sets a higher royalty rate and attracts fewer, less efficient firms. Otherwise, if MSE dominates, the patent holder lowers the royalty rate and attracts more firms to reach as many consumers as possible. From a policy perspective, I show that royalty licensing improves consumer surplus and that the positive effect increases with the number of licensees. |
| Keywords: | Innovation; Licensing; Royalties; Price Effect; Market Share Effect |
| JEL: | L13 L24 O31 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:azp:qsmswp:2302&r=cta |
| By: | Qing Hu (Kushiro Public University of Economics); Dan Li (School of Management, Xi’an Polytechnic University); Tomomichi Mizuno (Graduate School of Economics, Kobe University) |
| Abstract: | We investigate a supply chain comprising a manufacturer engaged in advertising and two retailers who compete with differentiated products. We examine the endogenous choice between competing on quantity or price for the retailers. Our analysis reveals that, depending on the level of product substitutability, the range of possible outcomes is varied and includes Cournot, Bertrand, and Cournot-Bertrand under informative advertising. This result contradicts the established understanding that firms tend to engage in Cournot competition as their dominant strategy. Furthermore, we find that under persuasive advertising, Cournot or Bertrand outcomes may be optimal, but Cournot-Bertrand never arises as an equilibrium. |
| Keywords: | Exporting; endogenous competition mode, advertising, vertical relationship |
| JEL: | D43 L13 M21 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:koe:wpaper:2301&r=cta |
| By: | Ayca Kaya (University of Miami); Santanu Roy (Southern Methodist University) |
| Abstract: | We analyze the effect of transparency of past trading volumes in markets where an informed long-lived seller can repeatedly trade with short-lived uninformed buyers. Transparency allows buyers to observe previously sold quantities. In markets with intra-period monopsony (single buyer each period), transparency reduces welfare if the ex-ante expected quality is low, but improves welfare if the expected quality is high. The effect is reversed in markets with intra-period competition (multiple buyers each period). This discrepancy in the efficiency implications of transparency is explained by how buyer competition affects the seller's ability to capture rents, which, in turn, influences market screening. |
| Keywords: | Repeated sales, adverse selection, transparency, competition, market efficiency |
| JEL: | D82 C73 D61 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:2205&r=cta |