Estimating the Effects of Tax Reform in Differentiated Product Oligopolistic Markets
The incidence of taxation and the design of an optimal tax system have been extensively discussed in the public finance literature but mainly within a competitive market setting or within a homogenous good (Cournot type) oligopoly. In a differentiated product oligopoly, the effect of taxation can be more complex as the rate of taxation may affect not only the prices, but also the profile and quality of products that are sold in the market. In this paper, we examine the effects of changing tax regimes in a differentiated product oligopoly. In order to illustrate our approach, we employ data from one such market: the automobile market in Israel. The analysis involves two steps. We first estimate the Nash equilibrium in a differentiated product oligopoly and then use the results to simulate the new equilibrium under different tax regimes. Using the estimated parameters from the current market equilibrium, we examine the effect of changes in tax policy on tax incidence, market prices, sales (and the types of cars sold in the market), consumer surplus, firms' profits, as well as government revenues.
|Date of creation:||Mar 1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Kenkel, Donald S, 1996. "New Estimates of the Optimal Tax on Alcohol," Economic Inquiry, Western Economic Association International, vol. 34(2), pages 296-319, April.
- Auerbach, Alan J., 1985.
"The theory of excess burden and optimal taxation,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127
- Gruenspecht, Howard K., 1988. "Export subsidies for differentiated products," Journal of International Economics, Elsevier, vol. 24(3-4), pages 331-344, May.
- Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
- Cremer, H. & Thisse, J.-F., .
"Commodity taxation in a differentiated oligopoly,"
CORE Discussion Papers RP
1112, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- CREMER, Helmut & THISSE, Jacques-FranÃ§ois, 1992. "Commodity taxation in a differentiated oligopoly," CORE Discussion Papers 1992035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cremer, Helmuth & Thisse, Jacques-François, 1993. "Commodity Taxation in a Differentiated Oligopoly," IDEI Working Papers 25, Institut d'Économie Industrielle (IDEI), Toulouse.
- Michael L. Katz & Harvey S. Rosen, 1983. "Tax Analysis in an Oligopoly Model," NBER Working Papers 1088, National Bureau of Economic Research, Inc.
- Myles, G. D., 1987. "Tax design in the presence of imperfect competition : An example," Journal of Public Economics, Elsevier, vol. 34(3), pages 367-378, December.
- Barnett, Paul G. & Keeler, Theodore E. & Hu, Teh-wei, 1995. "Oligopoly structure and the incidence of cigarette excise taxes," Journal of Public Economics, Elsevier, vol. 57(3), pages 457-470, July.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2107. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.