Signaling and indirect taxation

Tom Truyts

Journal of Public Economics, 2012, vol. 96, issue 3, 331-340

Abstract: Commodities communicate. We investigate optimal indirect taxation when both the intrinsic qualities of goods and signaling motivate consumption choices. Optimal indirect taxes are introduced into a monotonic signaling game. We provide sufficient conditions for the uniqueness of the D1 sequential equilibrium strategies. In the case of pure costly signaling, signaling goods can in equilibrium be taxed without burden. When commodities serve both intrinsic consumption and signaling, optimal taxes are characterized by a Ramsey rule, which deals with distortions resulting from signaling.

Keywords: Optimal taxation; Indirect taxation; Costly signaling; Identity; D1 criterion; Monotonic signaling (search for similar items in EconPapers)
JEL-codes: C72 H21 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:96:y:2012:i:3:p:331-340

DOI: 10.1016/j.jpubeco.2011.11.004

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