The ambiguous effects of taxing foreign buyers

Daniel Flores

Economics Letters, 2018, vol. 163, issue C, 179-181

Abstract: I model the effects of a discriminatory tax in the context of monopoly. The monopolist serves two types of customers: locals and foreigners. While the firm may or may not price discriminate, the government taxes foreign customers only. I show that this tax has ambiguous effects on price, output and welfare under uniform pricing. Moreover, it may reduce local welfare even if the price falls. I also show that the tax reduces output and local welfare under third-degree price discrimination.

Keywords: Taxation; Foreign buyers; Discrimination (search for similar items in EconPapers)
JEL-codes: D42 H2 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:163:y:2018:i:c:p:179-181

DOI: 10.1016/j.econlet.2017.12.033

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