Tail chasing activity in dogs is compulsive behavior. This behavior can be hereditary, Some psychological conditions like depression, anxiety and loneliness can also develop tail chasing behavior in dogs. Some breeds like bull terrier are more prone to have tail chasing habit .
Antidepressant medicines can be used depressive dogs.. You should take complete care of your dog and provide every possible opportunities to perform according to his abilities. Regular walk or exercise and playing with him can help to solve problem. You can also d get help from your local vet.
I would not simply stop with the compulsive behavior as the problem, though, if the dog is whimpering too. Allergies can play a major role in these problems, and they can be painful to the animal.There is also a physical condition that some of the short haired dogs can develop that requires help from the vet. My brother's dog had this, and for a while there was about a two inch length of his tail that had no fur anymore. But the medicine has helped and the dog is doing much better after about six months.
Is she chasing & biting in a playful manner or is she showing signs of distress? If she is whimpering she may be in pain. It could possibly be a tail injury or a problem with her anal glands. After a long day of swimming and playing hard at the beach, my dog spend the evening biting the base of his tail, whimpering and keeping it tucked under his butt. We took him to the Vet thinking it was problem with his anal glands and found out he had broken his tail. The Vet said is it fairly easy for this to happen and heals after about 5 days of rest. It is particularly common in Labs. They prescribed an non-steroidal anti-inflammatory pain medication (Metacam) and he seems to be fine. I think the symptoms you described sound similar to what my dog experienced, if she is in pain I would have your Vet check it out.