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Taxation and Market Power

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  • Konrad, K.A.
  • Morath, F.
  • Müller, W.

    (Tilburg University, Center for Economic Research)

Abstract

We analyze the incidence and welfare e¤ects of unit sales taxes in experimental monopoly and Bertrand markets. We nd, in line with economic theory, that rms with no market power are able to shift a high share of a tax burden on to consumers, independent of whether buyers are automated or human players. In monopoly markets, a monopolist bears a large share of the burden of a tax increase. With human buyers, however, this share is smaller than with automated buyers as the presence of human buyers constrains the pricing behavior of a monopolist.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2010-03.

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Date of creation: 2010
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Handle: RePEc:dgr:kubcen:201003

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Web page: http://center.uvt.nl

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Keywords: tax incidence; monopoly; Bertrand competition; experiment;

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