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Fair Commodity Taxation

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Listed:
  • Eric Gao
  • Daniel Luo

Abstract

We study optimal taxation in monopoly screening problems with a redistribution-minded regulator. When the regulator moves before the monopolist, any nondecreasing allocation can be implemented as the monopolist's optimum under an appropriate tax schedule. Despite this flexibility, we show that our redistribution-minded regulator never strictly benefits from randomization or nonlinear taxes. Under a strengthening of Myersonian regularity, which we call strong regularity, we characterize the tax rates on the fairness-efficiency frontier: it is enough for the regulator to consider policies which consist of a per-unit excise tax and a lump-sum rebate, with all (and only) tax rates between the consumer-surplus maximizing rate and the Laffer peak appearing on the frontier. Finally, we show subsidies are never used, and that every frontier threshold policy rations more than the unregulated monopolist.

Suggested Citation

  • Eric Gao & Daniel Luo, 2026. "Fair Commodity Taxation," Papers 2604.19044, arXiv.org, revised Aug 2026.
    • Handle: RePEc:arx:papers:2604.19044
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    References listed on IDEAS

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    1. Hunt Allcott & Benjamin Lockwood & Dmitry Taubinsky, 2018. "Ramsey Strikes Back: Optimal Commodity Tax and Redistribution in the Presence of Salience Effects," AEA Papers and Proceedings, American Economic Association, vol. 108, pages 88-92, May.
    2. Hunt Allcott & Benjamin B Lockwood & Dmitry Taubinsky, 2019. "Regressive Sin Taxes, with an Application to the Optimal Soda Tax," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1557-1626.
    3. Timothy Besley & Torsten Persson, 2014. "Why Do Developing Countries Tax So Little?," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 99-120, Fall.
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