OPTIMAL TAX INCENTIVE SCHEME FOR A DECENTRALIZED MULTI-PRODUCT FIRM.

Itzhak Venezia*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

Consider a multiproduct firm facing an uncertain demand. It is shown that the firm may benefit from decentralizing the decisions of how much to produce. To obtain these benefits, the firm should use the suggested internal tax incentive scheme. The quantities determined under the suggested scheme are equal to the sum of the quantities determined under centralization and a random vector with zero mean. This result is attributed to the dynamics by which a decentralized solution is obtained. It follows that the central planner may improve his decisions by behaving according to similar dynamics.

Original languageEnglish
Pages (from-to)1034-1042
Number of pages9
JournalManagement Science
Volume22
Issue number9
DOIs
StatePublished - 1976

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