Indirect taxation of monopolists: A tax on price
A digressive tax such as a variable rate sales tax or a tax on price gives firms an incentive for expanding output. Thus, unlike unit and ad valorem taxes which amplify the harm from monopoly, a digressive tax lessens the harm. We analyse a tax on price with respect to efficiency and practical policy appeal. In particular, we show how tax reforms based only on observation of price and quantity can make use of a tax on price in order to improve welfare. That is, it is practical to use a tax on price. The argument extends to fixed-number homogenous oligopoly.
Volume (Year): 7 (2013)
Issue (Month): ()
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- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
- Sumner, Michael, 1993. "Tax on Price: A Comment," Public Finance = Finances publiques, , vol. 48(2), pages 297-302.
- D. B. Suits & R. A. Musgrave, 1953. "Ad Valorem and Unit Taxes Compared," The Quarterly Journal of Economics, Oxford University Press, vol. 67(4), pages 598-604.
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