We develop a framework on cross-border competition in markets for goods with negative externalities and provide evidence for optimal fiscal policy with a special focus on taxation. We build the case of two bordering casinos with city governments setting taxes to maximize social welfare. Analytically, we show that cross-border casino gambling makes aggregate casino demand more elastic. By calibrating the model to fit the Detroit-Windsor market, our welfare analysis shows that cross-border competition induces both cities to lower casino taxes, while the optimal tax mix features a shift from the casino revenue tax to the good and service surcharge on gambling in Detroit but a reversed shift in Windsor. We also find a casino buy-out deal to not be credible because Windsor's willingness to pay Detroit to ban Michigan casinos is far below Detroit's willingness to accept giving up its casinos.

我们开发了具有负外部性的商品在市场上进行跨境竞争的框架，并提供了以税收为重点的最优财政政策的证据。我们以两个毗邻的赌场为例，市政府设置税收以最大化社会福利。从分析上看，我们表明，跨境赌场赌博使赌场总需求更具弹性。通过校准模型以适应底特律-温莎市场，我们的福利分析显示，跨境竞争会诱使两个城市降低赌场税，而最佳税收组合的特征是从赌场所得税向赌博的商品及服务附加费转变在底特律，但在温莎则相反。我们还发现赌场买断交易不可信，因为温莎