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Do Consumers Buy Less of a Taxed Good?

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Author Info
Hans Jarle Kind ()
Marko Köthenbürger ()
Guttorm Schjelderup ()

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Abstract

This paper shows that consumers may buy more of a taxed good if it is sold by a two-sided platform firm. Two-sided platform industries serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry (newspapers/magazines and advertisers), banking (cardholder and merchant), and the software industry (users and application developers). The paper compares ad-valorem and specific taxes and shows that they may have opposite effects on quantities sold, and that the ad-valorem tax - the most commonly used tax throughout the OECD - has effects on prices and quantities not previously recognized.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1635.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1635

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Related research
Keywords: two-sided markets; ad-valorem taxes; specific taxes;

Find related papers by JEL classification:
D40 - Microeconomics - - Market Structure and Pricing - - - General
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2002. "Tax Incidence in Differentiated Product Oligopoly," Staff General Research Papers 5202, Iowa State University, Department of Economics.
    Other versions:
  2. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  3. David S. Evans, 2003. "Some Empirical Aspects of Multi-Sided Platform Industries," Review of Network Economics, Concept Economics, vol. 2(3), pages 191-209, September. [Downloadable!]
  4. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "The efficiency of indirect taxes under imperfect competition," Journal of Public Economics, Elsevier, vol. 81(2), pages 231-251, August. [Downloadable!] (restricted)
    Other versions:
  5. Dierickx, I. & Matutes, C. & Neven, D., 1988. "Indirect taxation and cournot equilibrium," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 385-399. [Downloadable!] (restricted)
  6. Alan J. Auerbach & Roger H. Gordon, 2002. "Taxation of Financial Services under a VAT," American Economic Review, American Economic Association, vol. 92(2), pages 411-416, May. [Downloadable!]
  7. Don Fullerton & Gilbert E. Metcalf, 2002. "Tax Incidence," NBER Working Papers 8829, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December. [Downloadable!] (restricted)
    Other versions:
  9. CRAMPES, Claude & HARITCHABALET, Carole & JULLIEN, Bruno, 2006. "Advertising, Competition and Entry in Media Industries," IDEI Working Papers 374, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  10. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
    Other versions:
  11. Creedy, John, 1988. " Wicksell on Edgeworth's Tax Paradox," Scandinavian Journal of Economics, Blackwell Publishing, vol. 90(1), pages 101-12.
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This page was last updated on 2009-11-3.

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