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Commodity Taxation and the Effects of Entry: A Case of Variety Preferences

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  • Junko Doi
  • Koichi Futagami

Abstract

We study the relationship between commodity taxation and the effect of entry with imperfect competition. We develop a simple general equilibrium model with imperfect competition in which consumers have variety preferences. As a result, we see that introducing specific taxes increases social welfare. Furthermore, we show that the optimal tax rule is contrary to the inverse elasticity rule. Copyright Springer-Verlag Wien 2004

Suggested Citation

  • Junko Doi & Koichi Futagami, 2004. "Commodity Taxation and the Effects of Entry: A Case of Variety Preferences," Journal of Economics, Springer, vol. 83(3), pages 267-279, December.
    • Handle: RePEc:kap:jeczfn:v:83:y:2004:i:3:p:267-279
    DOI: 10.1007/s00712-004-0083-9
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    Citations

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    Cited by:

    1. Philipp Schröder & Allan Sørensen, 2010. "Ad valorem versus unit taxes: monopolistic competition, heterogeneous firms, and intra-industry reallocations," Journal of Economics, Springer, vol. 101(3), pages 247-265, November.
    2. Iwaisako, Tatsuro, 2019. "Welfare analysis of uniform entry tax in a general equilibrium model with heterogeneous industries," Economics Letters, Elsevier, vol. 178(C), pages 54-57.
    3. Wang, Vey & Lai, Chung-Hui, 2010. "Franchise Fee, Tax/Subsidy Policies and Economic Growth," MPRA Paper 27745, University Library of Munich, Germany.
    4. Shi, Hui, 2012. "The efficiency of government promotion of inbound tourism: The case of Australia," Economic Modelling, Elsevier, vol. 29(6), pages 2711-2718.
    5. Cheng-wei Chang & Ting-wei Lai, 2024. "Government spending and monopolistic competition with heterogeneous firm productivity," Journal of Economics, Springer, vol. 141(2), pages 101-135, March.

    More about this item

    Keywords

    commodity taxation; entry; Ramsey rule; H21; L13; L16;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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