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Excise Tax on a Non-Uniform Pricing Monopoly: Ad Valorem and Unit Taxes Compared

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  • Francis K. Cheung

Abstract

In this paper, ad valorem and unit taxation are compared on a model that allows for various monopolistic pricing policies, including uniform pricing and all three types of Pigouvian price discrimination. It shows that, for any given unit tax on a nonuniform pricing monopoly, there exists an output-neutral ad valorem tax rate that gives rise to a higher tax yield than the unit tax and there exists an ad valorem tax rate that welfare dominates the unit tax not only in the aggregate sense but also in the Pareto sense.

Suggested Citation

  • Francis K. Cheung, 1998. "Excise Tax on a Non-Uniform Pricing Monopoly: Ad Valorem and Unit Taxes Compared," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1192-1203, November.
    • Handle: RePEc:cje:issued:v:31:y:1998:i:5:p:1192-1203
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    Cited by:

    1. Tri Vi Dang & Florian Morath, 2013. "The Taxation of Bilateral Trade with Endogenous Information," Working Papers tax-mpg-rps-2013-07, Max Planck Institute for Tax Law and Public Finance.
    2. Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2014. "Failure of ad valorem and specific tax equivalence under uncertainty," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(4), pages 387-402, December.
    3. Valido, Jorge & Pilar Socorro, M. & Hernández, Aday & Betancor, Ofelia, 2014. "Air transport subsidies for resident passengers when carriers have market power," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 388-399.
    4. Plewka, Jörg, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 19, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Francisco Galera & José Luis Álvarez & Isabel Rodríguez-Tejedo, 2016. "Examples of unit tax superiority for a price-discriminating monopolist," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(1), pages 158-167, February.
    6. repec:ebl:ecbull:v:8:y:2002:i:3:p:1-10 is not listed on IDEAS
    7. repec:zbw:rwirep:0019 is not listed on IDEAS
    8. Jörg Plewka, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 0019, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.

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