Consumption taxes in monopolistic competition: a comment

Henrik Vetter ()

Journal of Economics, 2013, vol. 110, issue 3, 287-295

Abstract: We show that an ad valorem tax is better than an equal-revenue unit tax when consumers spend some fixed proportion of income on taxed goods, when firms use constant mark-up pricing, and entry and exit drive per-firm profit to zero. These key assumptions implies that ad valorem taxes are superior in oligopoly as well as monopolistic competition, showing that earlier results on taxes in monopolistic competition (Schröder in J Econ 83(3):281–292, 2004 ) are not due to the mode of competition, but rather are due to the functional forms used. Copyright Springer-Verlag Wien 2013

Keywords: Unit taxes; Ad valorem taxes; Monopolistic competition; Mark-up pricing; H22; D43 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:110:y:2013:i:3:p:287-295

DOI: 10.1007/s00712-012-0320-6

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