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Excise Tax on a Non-Uniform Pricing Monopoly: Ad Valorem and Unit Taxes Compared

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  • Francis K. Cheung

Abstract

In this paper, ad valorem and unit taxation are compared on a model that allows for various monopolistic pricing policies, including uniform pricing and all three types of Pigouvian price discrimination. It shows that, for any given unit tax on a nonuniform pricing monopoly, there exists an output-neutral ad valorem tax rate that gives rise to a higher tax yield than the unit tax and there exists an ad valorem tax rate that welfare dominates the unit tax not only in the aggregate sense but also in the Pareto sense.

Suggested Citation

  • Francis K. Cheung, 1998. "Excise Tax on a Non-Uniform Pricing Monopoly: Ad Valorem and Unit Taxes Compared," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1192-1203, November.
    • Handle: RePEc:cje:issued:v:31:y:1998:i:5:p:1192-1203
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    Citations

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    Cited by:

    1. Laszlo Goerke & Frederik Herzberg & Thorsten Upmann, 2014. "Failure of ad valorem and specific tax equivalence under uncertainty," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(4), pages 387-402, December.
    2. Honglin Li & Xiaolu Liu, 2021. "Ad valorem versus per unit taxation: a perspective from price signaling," Journal of Economics, Springer, vol. 134(1), pages 27-47, September.
    3. Anna D'Annunzio & Mohammed Mardan & Antonio Russo, 2020. "Multi‐part tariffs and differentiated commodity taxation," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 786-804, September.
    4. Valido, Jorge & Pilar Socorro, M. & Hernández, Aday & Betancor, Ofelia, 2014. "Air transport subsidies for resident passengers when carriers have market power," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 70(C), pages 388-399.
    5. Laszlo Goerke, 2012. "The Optimal Structure of Commodity Taxation in a Monopoly with Tax Avoidance or Evasion," Public Finance Review, , vol. 40(4), pages 519-536, July.
    6. Tri Vi Dang & Florian Morath, 2013. "The Taxation of Bilateral Trade with Endogenous Information," Working Papers tax-mpg-rps-2013-07, Max Planck Institute for Tax Law and Public Finance.
    7. Plewka, Jörg, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 19, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    8. repec:ebl:ecbull:v:8:y:2002:i:3:p:1-10 is not listed on IDEAS
    9. Tri Vi Dang & Xiaoxi Liu & Florian Morath, 2022. "Taxation, Information Acquisition, and Trade in Decentralized Markets: Theory and Test," Working Papers 2022-08, Faculty of Economics and Statistics, Universität Innsbruck.
    10. Laszlo Goerke, 2011. "Commodity tax structure under uncertainty in a perfectly competitive market," Journal of Economics, Springer, vol. 103(3), pages 203-219, July.
    11. Sissel Jensen & Guttorm Schjelderup, 2011. "Indirect taxation and tax incidence under nonlinear pricing," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(5), pages 519-532, October.
    12. Winston W. Chang & Tai‐Liang Chen, 2022. "Multi‐tier pricing in uniform and non‐uniform tax/subsidy systems," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(4), pages 486-508, December.
    13. Anna D'Annunzio & Antonio Russo, 2022. "Welfare-Enhancing Taxation and Price Discrimination," CESifo Working Paper Series 10007, CESifo.
    14. repec:zbw:rwirep:0019 is not listed on IDEAS
    15. de Rus, Ginés & Socorro, M. Pilar, 2022. "Subsidies in air transport markets: The economic consequences of choosing the wrong mechanism," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 160(C).
    16. Francois Boldron, 2002. "On the subsidization of local monopolies," Economics Bulletin, AccessEcon, vol. 8(3), pages 1-10.
    17. Jörg Plewka, 2007. "Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination," Ruhr Economic Papers 0019, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    18. François Boldron, 2003. "Le choix entre taxe unitaire et taxe ad valorem," Revue Française d'Économie, Programme National Persée, vol. 17(3), pages 109-128.
    19. McCalman, Phillip, 2010. "Trade policy in a "super size me" world," Journal of International Economics, Elsevier, vol. 81(2), pages 206-218, July.

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