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Taxation in Two-Sided Markets

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Author Info

  • Hans Jarle Kind
  • Marko Koethenbuerger
  • Guttorm Schjelderup

Abstract

Two-sided platform firms serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry, banking, and the software industry. A well known textbook result in one-sided markets is that a government may increase a monopolist's output and reduce the deadweight loss by subsidizing output. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher ad-valorem tax rate - rather than a subsidy - could increase output and enhance welfare.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-12/cesifo1_wp1871.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1871.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1871

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Keywords: two-sided markets; ad-valorem taxes; specific taxes; imperfect competition; industrial organization;

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References

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  1. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2001. "Tax Incidence in Differentiated Product Oligopoly," Staff General Research Papers 5202, Iowa State University, Department of Economics.
  2. Anderson, S.P. & de Palma, A. & Kreider, K., 1999. "The Efficiency of Indirect Taxes Under Imperfect Competition," Papers 99-09, Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor..
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Citations

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Cited by:
  1. Hans Jarle Kind & Guttorm Schjelderup & Frank Stähler, 2007. "Newspapers and Advertising: The Effects of Ad-Valorem Taxation under Duopoly," CESifo Working Paper Series 1891, CESifo Group Munich.
  2. Kind, Hans Jarle & Koethenbuerger, Marko & Schjelderup, Guttorm, 2008. "Efficiency Enhancing Taxation in Two-sided Markets," Discussion Papers 2008/1, Department of Business and Management Science, Norwegian School of Economics.
  3. Anderson, Simon P & Foros, Øystein & Kind, Hans Jarle, 2012. "Product quality, competition, and multi-purchasing," CEPR Discussion Papers 8923, C.E.P.R. Discussion Papers.
  4. Hans Jarle Kind & Marko Köthenbürger & Guttorm Schjelderup, 2009. "Should Utility-Reducing Media Advertising be Taxed?," CESifo Working Paper Series 2589, CESifo Group Munich.
  5. Robert A. Ritz, 2010. "A new version of Edgeworth's taxation paradox," Economics Series Working Papers 502, University of Oxford, Department of Economics.

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