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Sin taxes in differentiated product oligopoly: an application to the butter and margarine market

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Author Info

  • Rachel Griffith

    ()
    (Institute for Fiscal Studies and University of Manchester)

  • Lars Nesheim

    ()
    (Institute for Fiscal Studies and University College London)

  • Martin O'Connell

    ()
    (Institute for Fiscal Studies)

Abstract

There is policy interest in using tax to change food purchasing behaviour. The literature has not accounted for the oligopolistic structure of the industry. In oligopoly the impact of taxes depend on preferences, and how firms pass tax onto prices. We consider a tax on saturated fat. Using transaction level data we find that the form of tax and firms' strategic behaviour are important determinants of the impact. Our results suggest that an excise tax is more efficient than an ad valorem tax at reducing saturated fat purchases and an ad valorem tax is more efficient at raising revenue.

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Bibliographic Info

Paper provided by Centre for Microdata Methods and Practice, Institute for Fiscal Studies in its series CeMMAP working papers with number CWP37/10.

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Date of creation: Dec 2010
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Handle: RePEc:ifs:cemmap:37/10

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Cited by:
  1. Matthew Harding & Michael Lovenheim, 2014. "The Effect of Prices on Nutrition: Comparing the Impact of Product- and Nutrient-Specific Taxes," Discussion Papers 13-023, Stanford Institute for Economic Policy Research.
  2. Crawford, Gregory S., 2012. "Endogenous Product Choice : A Progress Report," The Warwick Economics Research Paper Series (TWERPS) 979, University of Warwick, Department of Economics.
  3. Finkelstein, Eric A. & Zhen, Chen & Bilger, Marcel & Nonnemaker, James & Farooqui, Assad M. & Todd, Jessica E., 2013. "Implications of a sugar-sweetened beverage (SSB) tax when substitutions to non-beverage items are considered," Journal of Health Economics, Elsevier, vol. 32(1), pages 219-239.

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