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Taxation and market power

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  • Konrad, Kai A.
  • Morath, Florian
  • Müller, Wieland

Abstract

We analyze the incidence and welfare effects of unit sales taxes in experimental monopoly and Bertrand markets. We find, in line with economic theory, that firms with no market power are able to shift a high share of a tax burden on to consumers, independent of whether buyers are automated or human players. In monopoly markets, a monopolist bears a large share of the burden of a tax increase. With human buyers, however, this share is smaller than with automated buyers as the presence of human buyers constrains the pricing behavior of a monopolist.

Suggested Citation

  • Konrad, Kai A. & Morath, Florian & Müller, Wieland, 2010. "Taxation and market power," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2010-07, WZB Berlin Social Science Center.
  • Handle: RePEc:zbw:wzbfff:spii201007
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    Cited by:

    1. Gerasimos T. Soldatos & Erotokritos Varelas, 2016. "Loan as a Durable Good and Bank Indirect-Tax Incidence," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 7(1), pages 33-38, January.
    2. Gerasimos T SOLDATOS, 2015. "Indirect Tax Incidence under Inelastic Underground Economy Demand," Journal of Economics and Behavioral Studies, AMH International, vol. 7(3), pages 56-62.
    3. Raymundo M. Campos-Vázquez & Eduardo M. Medina-Cortina, 2019. "Pass-through and competition: the impact of soft drink taxes as seen through Mexican supermarkets," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 28(1), pages 1-23, December.
    4. Soldatos, Gerasimos T. & Varelas, Erotokritos, 2015. "Loan as a Durable Good and Bank Indirect-Tax Incidence," MPRA Paper 68220, University Library of Munich, Germany.
    5. Kai A. Konrad & Florian Morath, 2020. "Escalation in conflict games: on beliefs and selection," Experimental Economics, Springer;Economic Science Association, vol. 23(3), pages 750-787, September.
    6. Soldatos, Gerasimos, 2014. "Indirect Tax Incidence under Inelastic Underground Economy Demand," MPRA Paper 64598, University Library of Munich, Germany.
    7. M Arantxa Colchero & Juan Carlos Salgado & Mishel Unar-Munguía & Mariana Molina & Shuwen Ng & Juan Angel Rivera-Dommarco, 2015. "Changes in Prices After an Excise Tax to Sweetened Sugar Beverages Was Implemented in Mexico: Evidence from Urban Areas," PLOS ONE, Public Library of Science, vol. 10(12), pages 1-11, December.

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    More about this item

    Keywords

    Tax incidence; monopoly; Bertrand competition; experiment;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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