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Price discrimination and tax incidence: Evidence from gasoline and diesel cars

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  • VERBOVEN, Frank

Abstract

The existing tax policies towards gasoline and diesel cars in European countries provide a unique opportunity to analyze quality-based price discrimination and implied tax incidence. We develop an econometric framework for the demand and pricing of gasoline and diesel cars. Consumers choose a gasoline or a diesel car based on their annual mileage. Manufacturers set gasoline and diesel car prices. Our empirical results show that the relative pricing of gasoline and diesel cars is consistent with price discrimination of a monopolistic type, and inconsistent with competitive models of pricing. On average, about 70 to 85 percent of the price differentials between gasoline and diesel cars can be explained by markup differences. The implied tax incidence is especially based on fuel taxes and less so on annual car taxes

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File URL: https://www.uantwerpen.be/images/uantwerpen/container1244/files/TEW%20-%20Onderzoek/Working%20Papers/RPS/1999/RPS-1999-003.pdf
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Bibliographic Info

Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 1999003.

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Length: 29 pages
Date of creation: Mar 1999
Date of revision:
Handle: RePEc:ant:wpaper:1999003

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Postal: Prinsstraat 13, B-2000 Antwerpen
Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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