Commodity Taxation in a Differentiated Oligopoly
AbstractThe 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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Bibliographic InfoArticle 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)
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Other versions of this item:
- Cremer, H. & Thisse, J.-F., . "Commodity taxation in a differentiated oligopoly," CORE Discussion Papers RP -1112, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Thisse, Jacques-François, 1993. "Commodity Taxation in a Differentiated Oligopoly," IDEI Working Papers 25, Institut d'Économie Industrielle (IDEI), Toulouse.
- CREMER, Helmut & THISSE, Jacques-François, 1992. "Commodity taxation in a differentiated oligopoly," CORE Discussion Papers 1992035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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