Recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under-shifted onto consumers in the presence of imperfect competition. These results are used to derive a method of estimating market power and conduct. An application is made to the European cigarette industry. Previous empirical comparison of the price effects of ad valorem and specific taxes is limited. For a group of countries with broadly similar cigarette industries, there is evidence of undershifting of both taxes, with the specific tax having a significantly greater impact on price. The extremes of both perfect competition and monopoly can be rejected. Behaviour is no less competitive than the equivalent of Cournot.
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Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number
9901.
Length: Date of creation: Jan 1999 Date of revision: Publication status: Forthcoming in International Journal of Industrial Organisation Handle: RePEc:ukc:ukcedp:9901
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Find related papers by JEL classification: H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
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.:
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[Downloadable!] (restricted)
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Frank J. Chaloupka & Kenneth E. Warner, 1999.
"The Economics of Smoking,"
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[Downloadable!] (restricted)
Other versions:
Chaloupka, Frank J. & Warner, Kenneth E., 2000.
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Handbook of Health Economics,
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Bulow, J. & Klemperer, P., 1999.
"The Tobacco Deal,"
Economics Papers
1999-w11, Economics Group, Nuffield College, University of Oxford.
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