DEMAND UNCERTAINTY, MONOPOLY WITH TWO‐STAGE INPUT DECISIONS, AND CORPORATION TAXES

ABSTRACT This paper attempts to investigate the effects of changes in the lump sum tax and the profit tax rate on the input, output and price decisions of the risk averse monopoly under demand uncertainty. It is assumed that, while the monopoly must determine its capital ex ante, it may modify the output and price determinations through adjusting its labor ex post. As the results of its analysis, the paper presents the new propositions with respect to the corporation taxes which have never been shown in both the deterministic models and the models which exclude the possibility of two‐stage input decisions, even under demand uncertainty.