Tax schemes in a class of differential games

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This paper evaluates tax schemes in a class of differential games. The results indicate that there are many tax schemes that support efficient resource usage, but each may fail to implement the targeted resource because of the multiplicity of equilibria. Since all of the equilibria are subgame perfect, it is difficult to predict which specific one arises. Care must then be taken in using a tax scheme as a remedy for the "tragedy of the commons." The advantages of other policy instruments (including command-and-control regulation and a tradable permit system) are also discussed.

Original languageEnglish
Pages (from-to)155-174
Number of pages20
JournalEconomic Theory
Issue number1
Publication statusPublished - 2008 Apr 1



  • Common property resource
  • Indeterminacy
  • Markov-perfect Nash equilibrium
  • Tax

ASJC Scopus subject areas

  • Economics and Econometrics

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