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A Reexamination of the Price Effects of a Unit Commodity Tax Under Perfect Competition and Monopoly

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  • Elchanan Cohn

    (University of South Carolina)

Abstract

Musgrave, m his Theory of Public Finance, argues that the pnce effect of a unit tax Abstract under monopoly is one half the effect under competition when demand and supply curves are linear. It is shown here that this rule applies only for the constant-cost case. For an increasing supply (marginal cost) schedule, the effect for monopoly is smaller than under competition, but by a factor less than 2.

Suggested Citation

  • Elchanan Cohn, 1996. "A Reexamination of the Price Effects of a Unit Commodity Tax Under Perfect Competition and Monopoly," Public Finance Review, , vol. 24(3), pages 391-396, July.
    • Handle: RePEc:sae:pubfin:v:24:y:1996:i:3:p:391-396
    DOI: 10.1177/109114219602400305
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    References listed on IDEAS

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    1. Kudrle, Robert Thomas, 1984. "Excise Tax Incidence in Limit Price Oligopoly," Public Finance = Finances publiques, , vol. 39(3), pages 321-346.
    2. J. N. Behrman, 1950. "Distributive Effects of an Excise Tax on a Monopolist," Journal of Political Economy, University of Chicago Press, vol. 58(6), pages 546-546.
    3. Robert L. Bishop, 1968. "The Effects of Specific and Ad Valorem Taxes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(2), pages 198-218.
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