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Excise taxes on gasoline and suppliers’ market power: A note

Eva Pichler and Michael H. Böheim

Economics Letters, 2013, vol. 118, issue 1, 110-112

Abstract: The present paper argues that in the retail gasoline industry, excise taxes, by amounting to a substantial part of prices, increase the firms’ degree of market power as demand elasticity is decreased. To avoid this market power effect, a ‘flexible value tax’ on gasoline is proposed. It yields equivalent tax revenues as the excise tax without disturbing competition in the retail gasoline market.

Keywords: Retail gasoline industry; Taxation; Market power (search for similar items in EconPapers)
JEL-codes: H2 H21 H32 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:110-112