Indirect taxation of monopolists: A tax on price
AbstractA digressive tax such as a variable rate sales tax or a tax on price gives firms an incentive for expanding output. Thus, unlike unit and ad valorem taxes which amplify the harm from monopoly, a digressive tax lessens the harm. We analyse a tax on price with respect to efficiency and practical policy appeal. In particular, we show how tax reforms based only on observation of price and quantity can make use of a tax on price in order to improve welfare. That is, it is practical to use a tax on price. The argument extends to fixed-number homogenous oligopoly. --
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Bibliographic InfoArticle provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.
Volume (Year): 7 (2013)
Issue (Month): 6 ()
tax on price; ad valorem tax; tax incidence;
Find related papers by JEL classification:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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- Sumner, Michael, 1993. "Tax on Price: A Comment," Public Finance = Finances publiques, , vol. 48(2), pages 297-302.
- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
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