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Taxation in Two-Sided Markets

  • Kind, Hans Jarle

    ()

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Koethenbuerger, Marko

    ()

    (Center for Economic Studies, Ludwig-Maximilians-Universität)

  • Schjelderup, Guttorm

    ()

    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Two-sided platform firms serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry, banking, and the software industry. A well known textbook result in one-sided markets is that a government may increase a monopolist’s output and reduce the deadweight loss by subsidizing output. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher advalorem tax rate - rather than a subsidy - could increase output and enhance welfare.

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File URL: http://hdl.handle.net/11250/163900
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Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2007/3.

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Length: 31 pages
Date of creation: 13 Feb 2007
Date of revision:
Handle: RePEc:hhs:nhhfms:2007_003
Contact details of provider: Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspxEmail:


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  1. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "Tax incidence in differentiated product oligopoly," Journal of Public Economics, Elsevier, vol. 81(2), pages 173-192, August.
  2. Anderson, Simon & de Palma, Andre & Kreider, Brent, 2001. "The Efficiency of Indirect Taxes Under Imperfect Competition," Staff General Research Papers 5203, Iowa State University, Department of Economics.
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