1BETA - Bureau d'Économie Théorique et Appliquée (Université de Lorraine, UFR Droit Sciences Economiques et Gestion, 13 place Carnot CO 70026, 54035 Nancy Cedex
Université de Strasbourg, Faculté des Sciences Economiques et de Gestion, 61 avenue de la Forêt Noire 67085 Strasbourg Cedex
- France)
Abstract : Economies with oligopolistic markets are prone to inefficient sunspot fluctuations triggered by autonomous changes in firms equilibrium conjectures. A well-designed taxation-subsidization scheme can eliminate these fluctuations by coordinating firms in each sector on a single equilibrium, left unaffected. The optimal taxation scheme must select the number of active firms that makes the best trade-off (in terms of consumer welfare) between the markup and the scale inefficiency distortions. Implementing such stabilization policy leads to significant welfare gains, attributable to an “efficient stabilization effect,” typically ignored in usual computations of the welfare costs of fluctuations.