Fair Commodity Taxation

Eric Gao and Daniel Luo

Papers from arXiv.org

Abstract: We study optimal taxation in monopoly screening problems with a redistribution-minded regulator. When the regulator moves before the monopolist, any nondecreasing allocation can be implemented as the monopolist's optimum under an appropriate tax schedule. Despite this flexibility, we show that our redistribution-minded regulator never strictly benefits from randomization or nonlinear taxes. Under a strengthening of Myersonian regularity, which we call strong regularity, we characterize the tax rates on the fairness-efficiency frontier: it is enough for the regulator to consider policies which consist of a per-unit excise tax and a lump-sum rebate, with all (and only) tax rates between the consumer-surplus maximizing rate and the Laffer peak appearing on the frontier. Finally, we show subsidies are never used, and that every frontier threshold policy rations more than the unregulated monopolist.

Date: 2026-04, Revised 2026-08
New Economics Papers: this item is included in nep-des, nep-pbe and nep-pub
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