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Specific and Ad Valorem Taxation in Asymmetric Cournot Oligopolies

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  • Vincenzo Denicolo
  • Massimo Matteuzzi

Abstract

This paper compares ad valorem and specific taxes in asymmetric homogenous Cournot oligopolies with constant marginal costs. We show that for any given level of industry output, ad valorem taxes are superior to specific taxes in terms of revenue raised. If the tax rates are sufficiently high, for any given specific tax one can find an ad valorem tax that leads to greater tax revenue, consumer surplus, and industry profits. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1008709914537
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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 7 (2000)
Issue (Month): 3 (May)
Pages: 335-342

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Handle: RePEc:kap:itaxpf:v:7:y:2000:i:3:p:335-342

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: specific tax; ad valorem tax; cournot oligopoly; welfare dominance;

References

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  1. Sofia Delipalla & Michael Keen, 1991. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition," Working Papers 821, Queen's University, Department of Economics.
  2. Gareth Myles, 1996. "Imperfect competition and the optimal combination of ad valorem and specific taxation," International Tax and Public Finance, Springer, vol. 3(1), pages 29-44, January.
  3. Bergstrom, Theodore C & Varian, Hal R, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 715-18, October.
  4. Hamilton, Stephen F., 1999. "Tax incidence under oligopoly: a comparison of policy approaches," Journal of Public Economics, Elsevier, vol. 71(2), pages 233-245, February.
  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.
  6. Dierickx, I. & Matutes, C. & Neven, D., 1988. "Indirect taxation and cournot equilibrium," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 385-399.
  7. Skeath, Susan E. & Trandel, Gregory A., 1994. "A Pareto comparison of ad valorem and unit taxes in noncompetitive environments," Journal of Public Economics, Elsevier, vol. 53(1), pages 53-71, January.
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Citations

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Cited by:
  1. Baldini, Massimo & Lambertini, Luca, 2011. "Profit taxation and capital accumulation in a dynamic oligopoly model," Japan and the World Economy, Elsevier, vol. 23(1), pages 13-18, January.
  2. Ramón Torregrosa, 2008. "Macroeconomic effects of an indirect tax substitution," Journal of Economics, Springer, vol. 94(3), pages 199-221, September.
  3. Alexei Kireyev, 2010. "Export Tax and Pricing Power," IMF Working Papers 10/269, International Monetary Fund.
  4. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
  5. Laszlo Goerke, 2011. "Commodity Tax Structure under Uncertainty in a Perfectly Competitive Market," CESifo Working Paper Series 3339, CESifo Group Munich.
  6. Ascari, Guido & Bertoletti, Paolo & Menegatti, Mario, 2005. "Taxing a monopolist," Research in Economics, Elsevier, vol. 59(4), pages 321-334, December.
  7. D. Dragone & L. Lambertini & A. Palestini, 2009. "On the non-neutrality of profit taxation in a Cournot oligopoly with environmental effects," Working Papers 662, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Lapan, Harvey E. & Hennessy, David A., 2007. "Unit Vs. Ad Valorem Taxes in Multi-Product Cournot Oligopoly," Staff General Research Papers 12780, Iowa State University, Department of Economics.
  9. Clément Carbonnier, 2011. "Shifting on prices of per unit and ad valorem consumption taxes, estimation on prices of alcoholic beverages in France," THEMA Working Papers 2011-20, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  10. Judy Hsu & X. Henry Wang, 2011. "A Note on the Efficiency of Indirect Taxes in an Asymmetric Cournot Oligopoly," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 53-59, February.
  11. Francisco Galera & Isabel Rodríguez-Tejedo & Juan C. Molero, 2012. "Technology Choice and Unit vs Ad Valorem Tax," Faculty Working Papers 18/12, School of Economics and Business Administration, University of Navarra.
  12. Sen, Neelanjan & Biswas, Rajit, 2014. "Indirect taxes in oligopoly in presence of licensing opportunities," MPRA Paper 55437, University Library of Munich, Germany.
  13. X. Wang & Jingang Zhao, 2009. "On the efficiency of indirect taxes in differentiated oligopolies with asymmetric costs," Journal of Economics, Springer, vol. 96(3), pages 223-239, April.

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