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Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist

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  • Kim, Jae-Cheol
  • Kim, Min-Young
  • Chun, Se-Hak

Abstract

This article analyzes how a property tax affects a lease-sale strategy of a durable-goods monopolist, and discusses its implications on social welfare. This paper presents some interesting results: (i) Contrary to the traditional view, social welfare can be enhanced by a tax when the time discount factor is low. (ii) Property tax causes the monopolist to spread production over two periods and increases the total stock of products, which enhances social welfare. (iii) The Coase conjecture fails and a monopolist produces only in period 1 and does not produce in period 2 when marginal cost is high. (iv) A mixed strategy of leasing and selling can be a unique solution, and a property tax encourages the monopolist to choose to sell even when the marginal cost is zero.

Suggested Citation

  • Kim, Jae-Cheol & Kim, Min-Young & Chun, Se-Hak, 2014. "Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 132-144.
    • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:132-144
    DOI: 10.1016/j.iref.2013.05.009
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    Cited by:

    1. Amagoia Sagasta & José M. Usategui, 2015. "Purchase and rental subsidies in durable-oligopolies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 213(2), pages 11-40, June.

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    More about this item

    Keywords

    Monopoly; Property tax; lease-sale strategy; Durable goods;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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