Autore
Schrader, AlexanderTitolo
Vertical foreclosure, tax spinning and oil taxation in oligopolyPeriodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papersAnno:
1994 - Fascicolo:
19 - Pagina iniziale:
1 - Pagina finale:
41This paper examines the incentives of a vertically integrated firm to supply crude oil to an unintegrated downstream rival, using a stylized model based on the Brent market and UK oil taxation. Market analysts claim that crude oil trading by integrated firms is mainly tax-induced (tax spinning), thereby neglecting the effect of strategic interaction that induces vertical foreclosure in game-theoretical models. I show that in a two-stage game where the integrated firm moves first and the second stage is constituted by a Cournot game, the conditions behind vertical supply are more restrictive than the tax spinning hypothesis assumes.
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