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Taxation of Public Franchises with Persistent Demand Shocks

Author

Listed:
  • Marco Buso

    (University of Padova)

  • Cesare Dosi

    (University of Padova)

  • Michele Moretto

    (University of Padova)

Abstract

We study a contract between a public and a private entity, where the latter commits to pay the awarding body for an exclusive right to supply a public service by using a government-owned facility, when there is asymmetric information on demand parameters following a Brownian motion process. We show that optimal taxation requires an appropriate combination of fixed and time-adjusted payments from actual sales. We then analyze how the optimal combination of fixed and variable transfers is impacted by the private revenue potential, by the expected variability of consumer demand and by the importance assigned to tax receipts relative to other welfare concerns.

Suggested Citation

  • Marco Buso & Cesare Dosi & Michele Moretto, 2023. "Taxation of Public Franchises with Persistent Demand Shocks," "Marco Fanno" Working Papers 0306, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0306
    as

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    References listed on IDEAS

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