Per unit versus ad valorem taxes under strategic bilateral trade

Gagnie Pascal Yebarth ()
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Gagnie Pascal Yebarth: EconomiX, UPL, Université Paris Nanterre

Economics Bulletin, 2025, vol. 45, issue 1, 384 - 391

Abstract: This paper compares ad valorem and per-unit taxes in a bilateral market where all traders have market power. To do so, we use a simple prototype of strategic market games, namely bilateral oligopoly models, and show that ad valorem taxation welfare-dominates per-unit taxation under strategic bilateral trade. Moreover, ad valorem and per-unit taxes have qualitatively different effects on strategic equilibrium offers.

Keywords: Ad valorem taxation; Noncooperative oligopoly; Per unit taxation; Welfare (search for similar items in EconPapers)
JEL-codes: C7 H2 (search for similar items in EconPapers)
Date: 2025-03-30
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