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Regulation through Output Related Profits Tax

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  • Glaister, Stephen

Abstract

Prospects are discussed for regulating a multiproduct, monopolistic enterprise through a tax on profit at a rate variable with output. Selection of weights when defining output could induce outcomes ranging from Ramsey pricing to any desired pattern of cross subsidy. The telecommunications industry is used to illustrate. If quality depends upon output (as in public transport) socially optimal pricing would be induced. The scheme has the advantage of limiting detailed intervention and preserving the profit motive. However, unrealistic assumptions are necessary and implementation would require a great deal of information. This limits its practical value. Copyright 1987 by Blackwell Publishing Ltd.

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  • Glaister, Stephen, 1987. "Regulation through Output Related Profits Tax," Journal of Industrial Economics, Wiley Blackwell, vol. 35(3), pages 281-296, March.
    • Handle: RePEc:bla:jindec:v:35:y:1987:i:3:p:281-96
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    Cited by:

    1. Powell, Kirsty & Szymanski, Stefan, 1997. "Regulation through comparative performance evaluation," Utilities Policy, Elsevier, vol. 6(4), pages 293-301, December.
    2. Vetter, Henrik, 2012. "Indirect taxation of monopolists: A tax on price," Economics Discussion Papers 2012-60, Kiel Institute for the World Economy (IfW Kiel).
    3. Spiller, Pablo T. & Vogelsang, Ingo & DEC, 1994. "Regulation, institutions, and commitment in the British telecommunications sector," Policy Research Working Paper Series 1241, The World Bank.

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