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Revenue equivalence and income taxation

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  • Veronika Grimm
  • Ulrich Schmidt

Abstract

This paper considers the classical independent private values model of auction theory in the presence of income taxation. We show that revenue equivalence remains valid if income taxes are proportional. Progressive and regressive taxes lead, in general, to asymmetries between bidders with the well-known consequence that revenue equivalence no longer holds. However, if symmetry of the bidders is maintained, progressive (regressive) income tax implies a higher (lower) expected revenue in first-price than in second-price auctions. Copyright Springer 2000

Suggested Citation

  • Veronika Grimm & Ulrich Schmidt, 2000. "Revenue equivalence and income taxation," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(1), pages 56-63, March.
    • Handle: RePEc:spr:jecfin:v:24:y:2000:i:1:p:56-63
    DOI: 10.1007/BF02759695
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    1. Wolfstetter,Elmar, 2000. "Topics in Microeconomics," Cambridge Books, Cambridge University Press, number 9780521645348.
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    Cited by:

    1. Abhishek, Vineet & Hajek, Bruce & Williams, Steven R., 2013. "Auctions with a profit sharing contract," Games and Economic Behavior, Elsevier, vol. 77(1), pages 247-270.
    2. Sunnevag, Kjell J., 2002. "Auctions combined with ex post taxation--expected revenue when three parties want a piece of the cake," Resources Policy, Elsevier, vol. 28(1-2), pages 49-59.

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