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Ad Valorem versus Unit Taxes in Oligopoly and Endogenous Market Conduct


  • Henrik Vetter


In oligopoly, comparison of the tax pass-through favors the use of ad valorem taxes compared to unit taxes. We argue that, in addition to differences in tax pass-through, the two taxes have a dissimilar effect on firms’ strategic interaction. The anticompetitive effects of the two taxes favor unit taxes over ad valorem taxes. We show both when there is a preference for unit taxation and when it is likely that the conventional preference for ad valorem taxation is upheld.

Suggested Citation

  • Henrik Vetter, 2014. "Ad Valorem versus Unit Taxes in Oligopoly and Endogenous Market Conduct," Public Finance Review, , vol. 42(4), pages 532-551, July.
  • Handle: RePEc:sae:pubfin:v:42:y:2014:i:4:p:532-551

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    Cited by:

    1. repec:kap:jeczfn:v:122:y:2017:i:2:d:10.1007_s00712-017-0538-4 is not listed on IDEAS
    2. Häckner, Jonas & Herzing, Mathias, 2016. "Welfare effects of taxation in oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 163(C), pages 141-166.


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