IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/vcontributions.2y2003i1n12.html
   My bibliography  Save this article

Oligopoly Deregulation and the Taxation of Commodities

Author

Listed:
  • Metcalf Gilbert E.

    (Tufts University)

  • Norman George

    (Tufts University)

Abstract

We examine market structure and optimal commodity taxation in a world in which firms produce differentiated products and can exert some degree of market power. Building on Kay and Keen (1983), we model two forms of product technologies, two forms of market entry structures, and two forms of pricing. This yields eight models providing a richer analysis of the role of taxes as regulatory tools than could be provided in Kay and Keen's analysis. In the presence of price discrimination, tax policy loses much of its effectiveness at serving as a substitute for direct regulation. Moreover, in cases where taxes can influence market structure, subsides rather than taxes may be required to achieve optimum market structure. Our results should remove the presumption that has developed over the past twenty years that the ad valorem tax rate should be positive to discourage excess entry in imperfectly competitive markets.

Suggested Citation

  • Metcalf Gilbert E. & Norman George, 2003. "Oligopoly Deregulation and the Taxation of Commodities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 2(1), pages 1-16, October.
    • Handle: RePEc:bpj:bejeap:v:contributions.2:y:2003:i:1:n:12
    DOI: 10.2202/1538-0645.1173
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1538-0645.1173
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1538-0645.1173?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Eaton, B Curtis & Schmitt, Nicolas, 1994. "Flexible Manufacturing and Market Structure," American Economic Review, American Economic Association, vol. 84(4), pages 875-888, September.
    2. George Norman & Jacques‐François Thisse, 1999. "Technology Choice and Market Structure: strategic aspects of flexible manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
    3. Kats, Amoz, 1995. "More on Hotelling's stability in competition," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 89-93, March.
    4. Kay, J. A. & Keen, M. J., 1983. "How should commodities be taxed? : Market structure, product heterogeneity and the optimal structure of commodity taxes," European Economic Review, Elsevier, vol. 23(3), pages 339-358, September.
    5. Norman, George & Thisse, Jacques-Francois, 1996. "Product Variety and Welfare under Tough and Soft Pricing Regimes," Economic Journal, Royal Economic Society, vol. 106(434), pages 76-91, January.
    6. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    7. repec:bla:jindec:v:47:y:1999:i:3:p:345-72 is not listed on IDEAS
    8. Novshek, William, 1980. "Equilibrium in simple spatial (or differentiated product) models," Journal of Economic Theory, Elsevier, vol. 22(2), pages 313-326, April.
    9. B. Curtis Eaton & Myrna Holtz Wooders, 1985. "Sophisticated Entry in a Model of Spatial Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 282-297, Summer.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gilbert E. Metcalf & George Norman, 2002. "Oligopoly Deregulation in General Equilibrium: A Tax Neutralization Result," Discussion Papers Series, Department of Economics, Tufts University 0210, Department of Economics, Tufts University.
    2. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
    3. Darlene C. Chisholm & George Norman, 2002. "Spatial Competition and Demand: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0216, Department of Economics, Tufts University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gilbert E. Metcalf & George Norman, 2002. "Oligopoly Deregulation in General Equilibrium: A Tax Neutralization Result," Discussion Papers Series, Department of Economics, Tufts University 0210, Department of Economics, Tufts University.
    2. Gupta, Barnali & Lai, Fu-Chuan & Pal, Debashis & Sarkar, Jyotirmoy & Yu, Chia-Ming, 2004. "Where to locate in a circular city?," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 759-782, June.
    3. Innes, Robert, 2008. "Entry for merger with flexible manufacturing: Implications for competition policy," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 266-287, January.
    4. George Norman & Jacques‐François Thisse, 1999. "Technology Choice and Market Structure: strategic aspects of flexible manufacturing," Journal of Industrial Economics, Wiley Blackwell, vol. 47(3), pages 345-372, September.
    5. Ralph M. Braid, 2016. "Potential merger-forcing entry reduces maximum spacing between firms in spatial competition," Papers in Regional Science, Wiley Blackwell, vol. 95(3), pages 653-669, August.
    6. Pal, Debashis, 1998. "Does Cournot competition yield spatial agglomeration?," Economics Letters, Elsevier, vol. 60(1), pages 49-53, July.
    7. Matsumura, Toshihiro & Okamura, Makoto, 2006. "A note on the excess entry theorem in spatial markets," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 1071-1076, September.
    8. Carsten Eckel, 2009. "International trade, flexible manufacturing, and outsourcing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1449-1472, November.
    9. Phillip J. Lederer, 2020. "Location-Price Competition with Delivered Pricing and Elastic Demand," Networks and Spatial Economics, Springer, vol. 20(2), pages 449-477, June.
    10. Ayd{i}n Alptekinou{g}lu & Charles J. Corbett, 2008. "Mass Customization vs. Mass Production: Variety and Price Competition," Manufacturing & Service Operations Management, INFORMS, vol. 10(2), pages 204-217, August.
    11. Ralph M. Braid, 2017. "Efficiency-enhancing horizontal mergers in spatial competition," Papers in Regional Science, Wiley Blackwell, vol. 96(4), pages 881-894, November.
    12. Sílvia Ferreira Jorge & Cesaltina Pacheco Pires, 2004. "Delivered versus Mill Nonlinear Pricing in Free Entry Markets," Microeconomics 0409006, University Library of Munich, Germany.
    13. Jacques-François Thisse & Filipp Ushchev, 2018. "Monopolistic competition without apology," ULB Institutional Repository 2013/387748, ULB -- Universite Libre de Bruxelles.
    14. Norman, George, 2002. "The relative advantages of flexible versus designated manufacturing technologies," Regional Science and Urban Economics, Elsevier, vol. 32(4), pages 419-445, July.
    15. Eric Giraud‐Héraud & Hakim Hammoudi & Mahdi Mokrane, 2003. "Multiproduct firm behaviour in a differentiated market," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(1), pages 41-61, March.
    16. Haimanti Bhattacharya & Robert Innes, 2016. "Concentration, Product Variety, and Entry-for-Merger: Evidence from New Product Introductions in the U.S. Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1360-1376.
    17. Yves Zenou & Sebastien Steinmetz, 2001. "On the Existence of Spatial Monopolies Under Free Entry," Economics Bulletin, AccessEcon, vol. 4(8), pages 1-10.
    18. Akamatsu, Takashi & Takayama, Yuki & Ikeda, Kiyohiro, 2012. "Spatial discounting, Fourier, and racetrack economy: A recipe for the analysis of spatial agglomeration models," Journal of Economic Dynamics and Control, Elsevier, vol. 36(11), pages 1729-1759.
    19. Steinmetz, Sebastien, 1998. "Spatial preemption with finitely lived equipments," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 253-270, March.
    20. Domenico SCALERA & Alberto ZAZZARO, 2004. "From regulation to free market: the experience of the European motor insurance market," Working Papers 205, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item

    Keywords

    imperfect competition; optimal taxation; differentiated products;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:contributions.2:y:2003:i:1:n:12. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.