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Soda tax design under imperfect competition

Author

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  • Lozachmeur, Jean-Marie
  • Cremer, Helmuth
  • Goulão, Catarina

Abstract

Health damages of an unhealthy good, such as a sugar-sweetened beverage, are misperceived by consumers. Market power affects both output and sugar content and these effects have to be balanced against Pigouvian considerations. Under “pseudo” perfect competition, a Pigouvian tax proportional to sugar content is sufficient to achieve a first best solution. Under monopoly, a specific tax on output achieves an efficient solution, but it must be an affine function of the sugar content. The calibrations of the French and US markets illustrate that both the total tax as well as its sugar component can be positive or negative.

Suggested Citation

  • Lozachmeur, Jean-Marie & Cremer, Helmuth & Goulão, Catarina, 2019. "Soda tax design under imperfect competition," TSE Working Papers 19-992, Toulouse School of Economics (TSE), revised Jan 2026.
    • Handle: RePEc:tse:wpaper:122814
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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