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Tax incidence in oligopolistic markets

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  • Häckner, Jonas
  • Herzing, Mathias

Abstract

This paper discusses how incidences of unit taxes and ad valorem taxes are related to various market characteristics under imperfect competition. Incidence is higher the more competitive markets are. More specifically, it is higher the wider the firms’ product ranges, the lower the degree of market concentration and the lower the degree of product differentiation, and higher in Bertrand markets compared to Cournot markets. Furthermore, the incidence is higher for unit taxes than for ad valorem taxes. The relative difference between unit and ad valorem tax incidence is larger the lower marginal costs and taxes are.

Suggested Citation

  • Häckner, Jonas & Herzing, Mathias, 2022. "Tax incidence in oligopolistic markets," Economics Letters, Elsevier, vol. 213(C).
    • Handle: RePEc:eee:ecolet:v:213:y:2022:i:c:s0165176522000453
    DOI: 10.1016/j.econlet.2022.110352
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    References listed on IDEAS

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    5. Häckner, Jonas & Herzing, Mathias, 2016. "Welfare effects of taxation in oligopolistic markets," Journal of Economic Theory, Elsevier, vol. 163(C), pages 141-166.
    6. Takanori ADACHI & Michal Fabinger, 2021. "Pass-Through and the Welfare Effects of Taxation under Imperfect Competition: A General Analysis," Discussion papers e-21-003, Graduate School of Economics , Kyoto University.
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    Citations

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    Cited by:

    1. Ellalee, Haider & Alali, Walid Y., 2022. "A Welfare and Pass-Through Effects of Regulations within Imperfect Competition," MPRA Paper 116512, University Library of Munich, Germany.
    2. Adachi, Takanori & Fabinger, Michal, 2022. "Pass-through, welfare, and incidence under imperfect competition," Journal of Public Economics, Elsevier, vol. 211(C).
    3. Callahan, Carolyn M. & Plečnik, James M. & Ryou, Jiwoo, 2024. "Do competitive markets encourage tax aggressiveness?," Advances in accounting, Elsevier, vol. 66(C).
    4. Olivia Kay, 2024. "Cournot Duopoly with Cost Asymmetry and Balanced Budget Specific Taxes and Subsidies," Games, MDPI, vol. 15(4), pages 1-10, August.
    5. Bernardo, Valeria & Fageda, Xavier & Teixidó, Jordi, 2024. "Flight ticket taxes in Europe: Environmental and economic impact," Transportation Research Part A: Policy and Practice, Elsevier, vol. 179(C).

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    More about this item

    Keywords

    Incidence; Taxation; Imperfect competition;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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