Welfare effects of taxation in oligopolistic markets

Jonas Häckner () and Mathias Herzing ()

Journal of Economic Theory, 2016, vol. 163, issue C, 141-166

Abstract: This paper discusses how marginal costs of public funds are related to various market characteristics under imperfect competition. Under a quite general tax scheme, these costs turn out to be lower the wider the firms' product ranges, the lower the degree of market concentration and the lower the degree of product differentiation. Moreover, marginal costs of taxation are lower in Bertrand markets compared to Cournot markets. In cases when marginal costs of public funds cannot easily be assessed we ask if pass-through rates can provide useful information for policy makers. The market characteristics that we analyze are shown to have opposite effects on pass-through and marginal costs of public funds. It is also demonstrated that the marginal cost of public funds is generally lower for ad valorem taxes than for unit taxes. The main results are based on a linear demand system, but a number of extensions confirm that our main results are reasonably robust.

Keywords: Welfare; Taxation; Imperfect competition (search for similar items in EconPapers)
JEL-codes: H21 H22 L13 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022053116000089
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:163:y:2016:i:c:p:141-166

DOI: 10.1016/j.jet.2016.01.007

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().