 Commodity taxes and welfare under endogenous market conductHenrik Vetter ()
Journal of Economics, 2017, vol. 122, issue 2, No 3, 137-154 Abstract: Abstract We consider consumption taxes in a model of endogenous Cournot versus Bertrand competition. It is argued that when the choice of unit versus ad valorem taxes affects longer-term decisions beyond the customary price or quantity decisions, the mix of the two taxes co-determines market conduct. This gives ad valorem taxes an anti-competitive effect that harms ad valorem taxes’ efficiency in comparison with unit taxes. We show that a mix of the taxes—or a unit tax alone if we compare one or the other of the taxes—is sometimes welfare superior on account of consumer-price and tax revenue effects. A practical implication of our findings is that pass-through rates are only sometimes useful guides for policy. In fact, we show when the proper response to demand for higher revenue is a higher unit tax rate and a lower ad valorem tax rate. Keywords: Oligopoly; Endogenous market conduct; Ad valorem taxes; Unit taxes (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:122:y:2017:i:2:d:10.1007_s00712-017-0538-4 DOI: 10.1007/s00712-017-0538-4 Access Statistics for this article Journal of Economics is currently edited by Giacomo Corneo More articles in Journal of Economics from Springer |
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