Taxation of Public Franchises with Persistent Demand Shocks

Marco Buso (), Cesare Dosi () and Michele Moretto
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Marco Buso: University of Padova
Cesare Dosi: University of Padova
Authors registered in the RePEc Author Service: Ying Lei Toh

No 306, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We study a contract between a public and a private entity, where the latter commits to pay the awarding body for an exclusive right to supply a public service by using a government-owned facility, when there is asymmetric information on demand parameters following a Brownian motion process. We show that optimal taxation requires an appropriate combination of fixed and time-adjusted payments from actual sales. We then analyze how the optimal combination of fixed and variable transfers is impacted by the private revenue potential, by the expected variability of consumer demand and by the importance assigned to tax receipts relative to other welfare concerns.

Keywords: Public-Private Partnerships; Public franchises; Monopoly; Taxation; Dynamic adverse selection; Persistent demand shocks. (search for similar items in EconPapers)
Pages: 31 pages
Date: 2023-09
New Economics Papers: this item is included in nep-law and nep-mic
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