Uncertainty, Economies of Scale, and Barrier to Entry.

Entry deterrence is examined under demand uncertainty and economies of scale. Both incumbent and potential entrant select capacity before demand is observed, provided expected discounted profit exceeds the cost of cap acity (risk neutrality). As in the certainty case, entry deterrence is not profi table in the absence ofeconomies of scale. However, Schmalensee recently proved another certainty result (that the monopoly profit stream which can be shielded from entry by economies of scale is bounded from above by the cost of minimum e fficient scale) is not valid in the presenceof uncertainty, even under risk neu trality. Copyright 1986 by Royal Economic Society.

The Complexity of Tax Structure in Competitive Political Systems

We explore the nature of tax complexity in competitive political systems. The analysis does not rely upon imperfections in the operation of the public sector. Complexity arises in the course of the struggle for office, during which political parties are induced to propose platforms that discriminate carefully among heterogeneous voters. A basic model is enriched by the addition of administration costs and self-selection, factors which limit the ability of any government to discriminate fully. The effect on complexity of inequalities in political influence is also investigated. The analysis suggests that simple tax systems (such as a flat tax or a broadly based tax without special provisions) are not compatible with vigorous political competition. Copyright Kluwer Academic Publishers 1998Taxation, Tax complexity, Administration costs, Self-selection, Probabilistic voting, Flat tax,