IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-01387357.html
   My bibliography  Save this paper

Taxation of a Digital Monopoly Platform

Author

Listed:
  • Marc Bourreau

    (Télécom ParisTech)

  • Bernard Caillaud

    (PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Romain de Nijs

    (X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

Abstract

This paper investigates the impact on fiscal revenues of taxing a two-sided mo-nopolistic platform offering personalized services to users and targeted advertising to sellers, based on the collection of users' personal data. We show that the introduction of a small tax on data collection, which has been proposed in the French context by Colin and Collin (2013), fails to increase fiscal revenues if the value added tax (VAT) rate is high enough, due to a tax base interdependence effect between the two taxes. Under a supermodularity condition on the platform's profit function as a function of its prices, this result generalizes to any per-unit tax. However, in some cases, an ad valorem tax on subscriptions or on advertising may raise fiscal revenues, irrespective of the VAT rate, as well as welfare.

Suggested Citation

  • Marc Bourreau & Bernard Caillaud & Romain de Nijs, 2016. "Taxation of a Digital Monopoly Platform," Working Papers hal-01387357, HAL.
    • Handle: RePEc:hal:wpaper:hal-01387357
    Note: View the original document on HAL open archive server: https://polytechnique.hal.science/hal-01387357v1
    as

    Download full text from publisher

    File URL: https://polytechnique.hal.science/hal-01387357v1/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
    2. Francis Bloch & Gabrielle Demange, 2018. "Taxation and privacy protection on Internet platforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(1), pages 52-66, February.
    3. Caillaud, Bernard & Jullien, Bruno, 2003. "Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-328, Summer.
    4. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    5. Neeraj Arora & Xavier Dreze & Anindya Ghose & James Hess & Raghuram Iyengar & Bing Jing & Yogesh Joshi & V. Kumar & Nicholas Lurie & Scott Neslin & S. Sajeesh & Meng Su & Niladri Syam & Jacquelyn Thom, 2008. "Putting one-to-one marketing to work: Personalization, customization, and choice," Marketing Letters, Springer, vol. 19(3), pages 305-321, December.
    6. Simon P. Anderson & Stephen Coate, 2005. "Market Provision of Broadcasting: A Welfare Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(4), pages 947-972.
    7. Häckner, Jonas & Herzing, Mathias, 2016. "Welfare effects of taxation in oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 163(C), pages 141-166.
    8. D. B. Suits & R. A. Musgrave, 1953. "Ad Valorem and Unit Taxes Compared," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 67(4), pages 598-604.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ellalee, Haider & Alali, Walid Y., 2022. "A Welfare and Pass-Through Effects of Regulations within Imperfect Competition," MPRA Paper 116512, University Library of Munich, Germany.
    2. Adachi, Takanori & Fabinger, Michal, 2022. "Pass-through, welfare, and incidence under imperfect competition," Journal of Public Economics, Elsevier, vol. 211(C).
    3. Henrik Vetter, 2017. "Commodity taxes and welfare under endogenous market conduct," Journal of Economics, Springer, vol. 122(2), pages 137-154, October.
    4. Hans Jarle Kind & Guttorm Schjelderup, 2025. "Taxation and multi-sided platforms: a review," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(3), pages 895-915, June.
    5. Takanori Adachi & Michal Fabinger, 2017. "Multi-Dimensional Pass-Through, Incidence, and the Welfare Burden of Taxation in Oligopoly," CIRJE F-Series CIRJE-F-1040, CIRJE, Faculty of Economics, University of Tokyo.
    6. Etro, Federico, 2016. "Research in economics and public finance," Research in Economics, Elsevier, vol. 70(1), pages 1-6.
    7. Anna D'Annunzio & Mohammed Mardan & Antonio Russo, 2020. "Multi‐part tariffs and differentiated commodity taxation," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 786-804, September.
    8. Hines Jr., James R. & Keen, Michael J., 2021. "Certain effects of random taxes," Journal of Public Economics, Elsevier, vol. 203(C).
    9. Kazuki Hiraga, 2019. "Unit versus ad valorem tax comparisons in a simple New Keynesian dynamic stochastic general equilibrium model," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 459-466, December.
    10. Shiou-Yen Chu & Tsaur-Chin Wu, 2023. "Ad valorem versus unit taxes on capital in a dynamic stochastic general equilibrium model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1435-1456, December.
    11. Jay Pil Choi & Doh-Shin Jeon, 2020. "Two-Sided Platforms and Biases in Technology Adoption," CESifo Working Paper Series 8559, CESifo.
    12. Naoshi Doi, 2022. "Choice of Policy Instruments with Endogenous Quality: Per‐Passenger and Per‐Flight Airport Charges in Japan," Journal of Industrial Economics, Wiley Blackwell, vol. 70(1), pages 44-88, March.
    13. Zhu Wang & Julian Wright, 2017. "Ad valorem platform fees, indirect taxes, and efficient price discrimination," RAND Journal of Economics, RAND Corporation, vol. 48(2), pages 467-484, May.
    14. Kojun Hamada & Takao Ohkawa & Makoto Okamura, 2024. "The optimal specific or ad valorem tax when the other tax is exogenously imposed in a free‐entry Cournot oligopoly market," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 251-266, January.
    15. Lassmann, Andrea & Liberini, Federica & Russo, Antonio & Cuevas, Ángel & Cuevas, Rubén, 2025. "Global spillovers of taxation in the online advertising market. Theory and evidence from facebook," European Economic Review, Elsevier, vol. 172(C).
    16. Michele Santoni, 2017. "Protective Excise Taxation," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 421-445, December.
    17. James R. Hines Jr. & Michael Keen, 2018. "Certain Effects of Uncertain Taxes," NBER Working Papers 25388, National Bureau of Economic Research, Inc.
    18. Takanori Adachi & Michal Fabinger, 2017. "Multi-Dimensional Pass-Through and Welfare Measures under Imperfect Competition," Papers 1702.04967, arXiv.org, revised Dec 2018.
    19. Xingtang Wang & Leonard F. S. Wang, 2022. "Indirect taxation, quality choice, and social welfare," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1764-1772, September.
    20. Choi, Jay Pil & Jeon, Doh-Shin, 2020. "Platform Design Biases in Two-Sided Markets," TSE Working Papers 20-1143, Toulouse School of Economics (TSE).

    More about this item

    Keywords

    two-sided market; digital economy; online advertising; data;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-01387357. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.