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Soda tax incidence and design under monopoly

Jean-Marie Lozachmeur, Helmuth Cremer () and Catarina Goulão

No 19-992, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: Health damages of an unhealthy good, such as a sugar-sweetened beverage, are misperceived by consumers. Market power affects both output and sugar content and these effects have to be balanced against Pigouvian considerations. Under “pseudo” perfect competition, a Pigouvian tax proportional to sugar content is sufficient to achieve a first best solution. Under monopoly, a specific tax on output achieves an efficient solution, but it must be an affine function of the sugar content. The calibrations of the French and US markets illustrate that both the total tax as well as its sugar component can be positive or negative.

Keywords: sin tax; tax incidence; misperception; monopoly (search for similar items in EconPapers)
JEL-codes: H22 I12 D42 (search for similar items in EconPapers)
Date: 2019-02, Revised 2020-07
New Economics Papers: this item is included in nep-hea and nep-pbe
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Working Paper: Soda tax incidence and design under monopoly (2019) Downloads
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