Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist

Jae-Cheol Kim, Min-Young Kim and Se-Hak Chun

International Review of Economics & Finance, 2014, vol. 29, issue C, 132-144

Abstract: This article analyzes how a property tax affects a lease-sale strategy of a durable-goods monopolist, and discusses its implications on social welfare. This paper presents some interesting results: (i) Contrary to the traditional view, social welfare can be enhanced by a tax when the time discount factor is low. (ii) Property tax causes the monopolist to spread production over two periods and increases the total stock of products, which enhances social welfare. (iii) The Coase conjecture fails and a monopolist produces only in period 1 and does not produce in period 2 when marginal cost is high. (iv) A mixed strategy of leasing and selling can be a unique solution, and a property tax encourages the monopolist to choose to sell even when the marginal cost is zero.

Keywords: Monopoly; Property tax; lease-sale strategy; Durable goods (search for similar items in EconPapers)
JEL-codes: D42 H20 L11 L12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:29:y:2014:i:c:p:132-144

DOI: 10.1016/j.iref.2013.05.009

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