Indirect taxation and undesirable competition

Leonard F.S. Wang, Chenhang Zeng and Qidi Zhang

Economics Letters, 2019, vol. 181, issue C, 104-106

Abstract: This paper studies undesirable competition in an asymmetric oligopoly under ad valorem taxation. We show that when the cost advantage of efficient firms is large, both the entry of and the cost reduction in efficient firms raise social welfare, but unexpectedly hurt consumers. Moreover, we find that unit taxation yields higher consumer surplus in equilibrium, and it could also be welfare superior to ad valorem taxation under certain conditions.

Keywords: Ad valorem tax; Unit tax; Cournot (search for similar items in EconPapers)
JEL-codes: D43 H21 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:181:y:2019:i:c:p:104-106

DOI: 10.1016/j.econlet.2019.05.010

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