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Abstract

This paper investigates the pass-through of an excise tax imposed on a monopoly firm with constant marginal cost. The optimal price increases as tax increases for any demand function. Tax pass-through is globally under or in excess of 100% according as the direct demand function is log-concave or log-convex. The analysis relies on supermodular optimization and delivers conclusions based on minimal su¢cient assumptions in a simple, broadly accessible and self-contained framework. Further results allow for mixed conditions that provide precise and local determination of pass-through. Several illustrative examples are given. Policy conclusions relating to the relative wisdom of taxing high versus low cost monopoly firms are drawn from the results.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2004-10.

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Date of creation: 2004
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Handle: RePEc:ulp:sbbeta:2004-10

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This paper has been announced in the following NEP Reports:

• NEP-ACC-2005-06-05 (Accounting & Auditing)
• NEP-ALL-2005-06-05 (All new papers)
• NEP-IND-2005-06-05 (Industrial Organization)
• NEP-PUB-2005-06-05 (Public Finance)

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Cited by:

1. Giovanni Dosi & Patrick Llerena & Mauro Sylos Labini, 2005. "Science-Technology-Industry Links and the ”European Paradox”: Some Notes on the Dynamics of Scientific and Technological Research in Europe," LEM Papers Series 2005/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
   
   • Giovanni Dosi & Patrick Llerena & Mauro Sylos Labin, 2005. "Science-Technology-Industry Links and the ”European Paradox”: Some Notes on the Dynamics of Scientific and Technological Research in Europe," Working Papers of BETA 2005-11, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
2. Rabah Amir & Thierry Leiber & Isabelle Maret, 2006. "Channel Performance and Incentives for Retail Cost Misrepresentation," Working Papers of BETA 2006-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
3. Meixing DAI, 2007. "A two-pillar strategy to keep inflation expectations at bay: A basic theoretical framework," Working Papers of BETA 2007-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
4. Meixing DAI & Moïse SIDIROPOULOS & Eleftherios SPYROMITROS, 2007. "La transparence de la politique monétaire et la dynamique des marchés financiers," Working Papers of BETA 2007-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
5. Stéphane Betrand & Kene Boun My & Alban Verchère, 2005. "Faire émerger la coopération internationale : une approche expérimentale comparée du bilatéralisme et du multilatéralisme," Working Papers of BETA 2005-13, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
6. Nicolas Carayol & Pascale Roux & Murat Yıldızoglu, 2006. "Coordination failures in network formation," Working Papers of BETA 2006-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
7. Estelle Dhont-Peltrault & Etienne Pfister, 2007. "R&D cooperation versus R&D subcontracting: empirical evidence from French survey data," Working Papers of BETA 2007-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
8. Nicolas Carayol & Pascale Roux, 2006. "A strategic model of complex networks formation," Working Papers of BETA 2006-02, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
9. Lapan, Harvey & Moschini, GianCarlo, 2009. "Quality certification standards in competitive markets: When consumers and producers (dis)agree," Economics Letters, Elsevier, vol. 104(3), pages 144-147, September.
   
   • Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Quality Certification Standards in Competitive Markets: When Consumers and Producers (Dis)Agree," Staff General Research Papers 13048, Iowa State University, Department of Economics.
10. Jalal EL OUARDIGHI & Rabija SOMUN-KAPETANOVIC, 2006. "Convergence des contributions aux inégalités de richesse dans le développement des pays européens," Working Papers of BETA 2006-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
11. Tapas K. Mishra, 2006. "A Further Look into the Demography-based GDP Forecasting Method," Working Papers of BETA 2006-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
12. Gisèle Umbhauer, 2007. "De l’amiante au chrysotile, un glissement stratégique dans la désinformation," Working Papers of BETA 2007-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
13. Rachel Levy & Paul Muller, 2006. "Do academic laboratories correspond to scientific communities? Evidence from a large European university," Working Papers of BETA 2006-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
14. Sofia Pessoa e Costa & Stéphane Robin, 2007. "The Impact Of Training Programmes On Wages In France: An Evaluation Of The “Qualifying Contract” Using Propensity Scores," Working Papers of BETA 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
15. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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