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Two villages that belong to two different independent communities compete for a plan that will offer tax reductions that help industrial development. If both offer

Two villages that belong to two different independent communities compete for a plan that will offer tax reductions that help industrial development. If both offer the same reductions, the tax rate decreases with no guarantees of any industrial development. In such a case, the villages would have preferred higher taxes. The idea is to attract firms even if it implies tax reductions. Represent this situation as a game with a numerical example. Explain what are the relevant strategic factors.

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