Strategy and Market Structure in Western Coal Taxation

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Abstract
This paper analyzes the potential market power of western states in setting coal severance taxes and the emphasis placed by these states on the development of their coal resources vs. obtaining tax revenues. Three market structures are analyzed. One involves a western regional cartel, setting taxes collectively. The other cases are noncooperative tax equilibria with Montana and Wyoming competing against each other. We conclude that the western states seem to be primarily concerned with revenue collection and are very efficient extractors of economic rent.

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