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Commodity Taxation in a Differentiated Oligopoly

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Author Info
Cremer, Helmuth
Thisse, Jacques-Francois

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Abstract

The authors introduce commodity taxation into a vertical differentiation model with endogenous product selection. They show that a uniform ad valorem tax lowers both qualities, distorts the allocation of consumers between firms, and lowers the consumer prices of both variants. A small uniform tax is always welfare-improving over the no-tax equilibrium. A differentiation of tax rates may or may not be desirable on welfare grounds. If a welfare improvement is possible through a nonuniform tax, it is always the high-quality variant that must be taxed at a higher rate. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 35 (1994)
Issue (Month): 3 (August)
Pages: 613-33
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Handle: RePEc:ier:iecrev:v:35:y:1994:i:3:p:613-33

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  1. José Luis Moraga & Jean-Marie Viaene, 1999. "Endogenous Quality Effects of Trade Policy," Tinbergen Institute Discussion Papers 99-094/2, Tinbergen Institute. [Downloadable!]
  2. Gilbert E. Metcalf & George Norman, 2002. "Oligopoly Deregulation in General Equilibrium: A Tax Neutralization Result," Discussion Papers Series, Department of Economics, Tufts University 0210, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
  3. Clément Carbonnier, 2005. "Is Tax Shifting Asymmetric? Evidence from French VAT reforms, 1995-2000," PSE Working Papers 2005-34, PSE (Ecole normale supérieure). [Downloadable!]
  4. Sophia Delipalla & Owen O'Donnell, 1998. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition: Evidence from the European Cigarette Industry," Studies in Economics 9802, Department of Economics, University of Kent. [Downloadable!]
  5. Michael Keen, 1998. "The balance between specific and ad valorem taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 19(1), pages 1-37, February. [Downloadable!]
  6. E. Bacchiega & L. Lambertini & A. Mantovani, 2007. "Process and product innovation in a vertically differentiated industry," Working Papers 583, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
  7. 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. [Downloadable!]
  8. Luca Lambertini, 1995. "Product Innovation Under Vertical Differentiation and the Persistence of Monoply," Working Papers 227, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
  9. L. Lambertini, 2001. "Dynamic Duopoly with Vertical Differentiation," Working Papers 396, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
  10. Luca Lambertini & Piero Tedeschi, 2006. "Would you like to enter first with a low-quality good?," Working Papers 20060504, Università degli Studi di Milano-Bicocca, Dipartimento di Statistica. [Downloadable!]
    Other versions:
  11. Clément Carbonnier, 2006. "Who pays commodity taxes ? Evidence from French reforms, 1987-1999," PSE Working Papers 2006-13, PSE (Ecole normale supérieure). [Downloadable!]
  12. Luca Lambertini, 1995. "The Multiproduct Monopolist Under Vertical Differentiations: an Inductive Approach," Working Papers 226, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
  13. Lutz, Stefan H., 2002. "The Effects of Quotas on Vertical Intra-Industry Trade," ZEW Discussion Papers 02-61, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  14. Michael Kuhn, . "Low Quality Leadership in Vertically Differentiated Duopoly," Discussion Papers 00/38, Department of Economics, University of York. [Downloadable!]
  15. Alan J. Auerbach & James R. Hines Jr., 2001. "Taxation and Economic Efficiency," NBER Working Papers 8181, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Fershtman, Chaim & Gandal, Neil & Markovich, Sarit, 1999. "Estimating the Effects of Tax Reform in Differentiated Product Oligopolistic Markets," CEPR Discussion Papers 2107, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  17. Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(5), pages 449-463, October. [Downloadable!] (restricted)
  18. Jose-Luis Moraga & Jean-Marie Viaene, 2001. "Trade and Industrial Policy of Transition Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  19. Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0607, Department of Economics, Tufts University. [Downloadable!]
    Other versions:
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