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Reexamining Ad Valorem and Specific Taxation under Uncertainty

Author

Listed:
  • Kuang-Cheng Andy Wang
  • Ping-Yao Chou
  • Shao-Hsun Keng

Abstract

This study investigates the specific tax and ad valorem tax under uncertainty.We show: (1) Under cost uncertainty, the specific tax may be superior to the ad valorem tax regardless of whether the market is characterized by a monopoly or oligopoly. When the market is perfectly competitive, the specific tax is superior to the ad valorem tax. (2) Under demand uncertainty, the ad valorem tax is preferred to the specific tax under both monopoly and oligopoly. Both taxes are equivalent when the market is competitive.

Suggested Citation

  • Kuang-Cheng Andy Wang & Ping-Yao Chou & Shao-Hsun Keng, 2023. "Reexamining Ad Valorem and Specific Taxation under Uncertainty," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 179(2), pages 320-339.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2023-0026
    DOI: 10.1628/jite-2023-0026
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    More about this item

    Keywords

    uncertainty; ad valorem tax; specific tax; welfare superiority;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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