Estimating tax incidence, market power and market conduct: The European cigarette industry
AbstractRecent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under-shifted onto consumers in the presence of imperfect competition. These results are used to derive a method of estimating market power and conduct. An application is made to the European cigarette industry. Previous empirical comparison of the price effects of ad valorem and specific taxes is limited. For a group of countries with broadly similar cigarette industries, there is evidence of undershifting of both taxes, with the specific tax having a significantly greater impact on price. The extremes of both perfect competition and monopoly can be rejected. Behaviour is no less competitive than the equivalent of Cournot.
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Bibliographic InfoArticle provided by Elsevier in its journal International Journal of Industrial Organization.
Volume (Year): 19 (2001)
Issue (Month): 6 (May)
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Web page: http://www.elsevier.com/locate/inca/505551
Other versions of this item:
- Sophia Delipalla & Owen O'Donnell, 1999. "Estimating Tax Incidence, Market Power and Market Conduct: The European Cigarette Industry," Studies in Economics 9901, Department of Economics, University of Kent.
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
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