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Excise taxes on gasoline and suppliers’ market power: A note

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  • Pichler, Eva
  • Böheim, Michael H.

Abstract

The present paper argues that in the retail gasoline industry, excise taxes, by amounting to a substantial part of prices, increase the firms’ degree of market power as demand elasticity is decreased. To avoid this market power effect, a ‘flexible value tax’ on gasoline is proposed. It yields equivalent tax revenues as the excise tax without disturbing competition in the retail gasoline market.

Suggested Citation

  • Pichler, Eva & Böheim, Michael H., 2013. "Excise taxes on gasoline and suppliers’ market power: A note," Economics Letters, Elsevier, vol. 118(1), pages 110-112.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:110-112
    DOI: 10.1016/j.econlet.2012.08.022
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    References listed on IDEAS

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    1. Justine S. Hastings, 2004. "Vertical Relationships and Competition in Retail Gasoline Markets: Empirical Evidence from Contract Changes in Southern California," American Economic Review, American Economic Association, vol. 94(1), pages 317-328, March.
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    7. Dahl, Carol A, 1979. "Consumer Adjustment to a Gasoline Tax," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 427-432, August.
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    11. Janet S. Netz & Beck A. Taylor, 2002. "Maximum Or Minimum Differentiation? Location Patterns Of Retail Outlets," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 162-175, February.
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    Cited by:

    1. Chang, Kai & Zhang, Chao, 2018. "Asymmetric dependence structure between emissions allowances and wholesale diesel/gasoline prices in emerging China's emissions trading scheme pilots," Energy, Elsevier, vol. 164(C), pages 124-136.

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    More about this item

    Keywords

    Retail gasoline industry; Taxation; Market power;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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