engleski

Optimal Taxation of a Monopoly with Cobb-Douglas Production Function for Two Inputs as a Bilevel Programming Problem

The paper formulates the problem of optimal tax policy for profit maximizing monopolist as a bilevel programming problem. The output of the monopolist is described by the Cobb-Douglas production function of two inputs – labour and capital. Tax is modelled as an amount per unit product. Government is the leader and determines tax amount with the objective of maximizing its tax revenue. Monopolist is the follower who, given the leader’s tax decision, decides about input levels and thus output quantity with the objective of maximizing the profit.

optimal tax revenue, profit maximizing monopolist, Cobb-Douglas production function, two inputs, bilevel programming

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