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Specific excise taxation in a unionised differentiated duopoly

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  • Michele Santoni

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Abstract

This article considers the incidence and welfare effects of a specific excise tax in a unionized duopoly model with differentiated products, linear demand and cost curves, and wage bargaining. The article allows for both Cournot and Bertrand competition. The article shows that unionization lowers the degree of undershifting of the tax on the producer's net price, the marginal increase in the consumer's price, and the employment loss. The excess burden of an equal revenue tax is higher with a unionized labor market and higher with Cournot than Bertrand competition. Unionization increases the optimal output subsidy with wage bargaining. This paper is published in Public Finance Review, Vol. 28, No. 4, 351-371 (2000).

Suggested Citation

  • Michele Santoni, 2000. "Specific excise taxation in a unionised differentiated duopoly," Departmental Working Papers 2000-06, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2000-06
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    More about this item

    Keywords

    Tax incidence; excise duty; unionized oligopoly;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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