Indirect taxation of monopolists: A tax on price

Henrik Vetter

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2013, vol. 7, No 2013-6, 13 pages

Abstract: A digressive tax such as a variable rate sales tax or a tax on price gives firms an incentive for expanding output. Thus, unlike unit and ad valorem taxes which amplify the harm from monopoly, a digressive tax lessens the harm. We analyse a tax on price with respect to efficiency and practical policy appeal. In particular, we show how tax reforms based only on observation of price and quantity can make use of a tax on price in order to improve welfare. That is, it is practical to use a tax on price. The argument extends to fixed-number homogenous oligopoly.

Keywords: tax on price; ad valorem tax; tax incidence (search for similar items in EconPapers)
JEL-codes: H21 L13 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:20136

DOI: 10.5018/economics-ejournal.ja.2013-6

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