Ad Valorem versus Unit Taxes in Oligopoly and Endogenous Market Conduct

Henrik Vetter

Public Finance Review, 2014, vol. 42, issue 4, 532-551

Abstract: In oligopoly, comparison of the tax pass-through favors the use of ad valorem taxes compared to unit taxes. We argue that, in addition to differences in tax pass-through, the two taxes have a dissimilar effect on firms’ strategic interaction. The anticompetitive effects of the two taxes favor unit taxes over ad valorem taxes. We show both when there is a preference for unit taxation and when it is likely that the conventional preference for ad valorem taxation is upheld.

Keywords: unit taxation; ad valorem taxation; imperfect competition (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:pubfin:v:42:y:2014:i:4:p:532-551

DOI: 10.1177/1091142113496129

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