Tax competition equilibria analysis under taxpayers' monopolistic competition

The effect of taxpyers' competition at jurisdictions' local markets on the properties of the tax competition equilibrium is studied. The general equilibrium model is considered with mobile firms acting under monopolistic competition on local markets. It is shown that equilibrium tax rate tends to grow when the conditions of the firms' functioning are worsening because of any reason. The peculiar effect is multiple equilibria appearance if the profit of the firms is not monotonic function of their quantity.