Distribution and Dynamics in a Simple Tax Regime Transition
We examine transitions between excise tax and license fee regimes in the laboratory. The regimes have matched equilibrium Marshallian surplus, but license fees generate more tax revenue. The license fees are large “avoidable costs,” known to hamper competitive equilibrium convergence. With moderately experienced subjects, the prolonged transition to the license fee equilibrium has these features: (1) Prices below equilibrium levels, resulting in firm losses; (2) Marshallian surplus above equilibrium levels; and (3) transitional windfalls for the tax authority. With highly experienced subjects, license fees lead to the instability and lower seller profits and efficiency observed in past avoidable cost markets.
|Date of creation:||Mar 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.uh.edu/class/economics/
More information through EDIRC
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.:
- Stern, Nicholas, 1992. "From the static to the dynamic: some problems in the theory of taxation," Journal of Public Economics, Elsevier, vol. 47(2), pages 273-297, March.
- Robert Moir, 1998. "A Monte Carlo Analysis of the Fisher Randomization Technique: Reviving Randomization for Experimental Economists," Experimental Economics, Springer, vol. 1(1), pages 87-100, June.
- Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
- Smith, Vernon L. & Williams, Arlington W., 1982. "The effects of rent asymmetries in experimental auction markets," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 99-116, March.
- Plott, Charles R., 1989. "An updated review of industrial organization: Applications of experimental methods," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 19, pages 1109-1176 Elsevier.
- Van Boening, Mark V & Wilcox, Nathaniel T, 1996. "Avoidable Cost: Ride a Double Auction Roller Coaster," American Economic Review, American Economic Association, vol. 86(3), pages 461-77, June.
When requesting a correction, please mention this item's handle: RePEc:hou:wpaper:2003-02. 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: (Dietrich Vollrath)
If references are entirely missing, you can add them using this form.