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Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy

Author

Listed:
  • BELLEFLAMME, Paul

    (Université catholique de Louvain, CORE, Belgium)

  • TOULEMONDE, Eric

Abstract

We consider the effects of taxes for competing two-sided platforms. We first detail how a platform passes a tax increase on its prices. Adding price competition, we study next how the tax affects profits. Because of the strategic implications of the cross-side external effects, the tax increase may end up increasing the profit of the taxed platform (lucky break) or, conversely, reducing it twice (double jeopardy).

Suggested Citation

  • BELLEFLAMME, Paul & TOULEMONDE, Eric, 2016. "Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy," LIDAM Discussion Papers CORE 2016012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2016012
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2016.html
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    Cited by:

    1. Francis Bloch & Gabrielle Demange, 2019. "Profit-Sharing Rules and the Taxation of Multinational Internet Platforms," CESifo Working Paper Series 7818, CESifo.
    2. Paul Belleflamme & Martin Peitz, 2018. "Platforms and network effects," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 11, pages 286-317, Edward Elgar Publishing.

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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