Commodity Taxation and the Effects of Entry: A Case of Variety Preferences
We study the relationship between commodity taxation and the effect of entry with imperfect competition. We develop a simple general equilibrium model with imperfect competition in which consumers have variety preferences. As a result, we see that introducing specific taxes increases social welfare. Furthermore, we show that the optimal tax rule is contrary to the inverse elasticity rule. Copyright Springer-Verlag Wien 2004
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