how should commodities be taxed market structure product heterogeneity and the optimal structure of commodity taxes abstract this paper is concerned with the form in which commodity taxes are best imposed and particularly with the appropriate balance between specific and ad valorem components this neglected issue is of policy importance in relation to the harmonization of tax structures within the eec and of theoretical interest as a point of contact between optimal tax theory and models of non price competition the roles of the two taxes as purely corrective devices under a variety of market forms are established and discussed the analysis suggests that heavily taxed commodities should normally be subject to high specific rather than high ad valorem taxes

the incidence of non linear price dependent consumption taxes abstract the present article generalizes economic literature on the incidence of consumption taxes to general schedules of consumption taxes dependent on price previous studies were limited to the cases of per unit and ad valorem taxes three main contributions are made methodologically the elasticity of the tax function is introduced as a new parameter so that the price elasticity of general consumption tax schedules in different models of imperfect competition might be dealt with in a tractable manner theoretically existing results on the difference between the incidence of ad valorem and per unit consumption taxes are generalized to non linear consumption taxes the larger the elasticity of the tax function the smaller the share of consumption tax borne by consumers from the perspective of applied public economics it is shown how the regulator may reduce prices in very uncompetitive markets by increasing the elasticity of the consumption tax on a targeted range of producer prices

excise taxes with multiproduct transactions i examine excise taxes levied on multiproduct retailers excise taxes reduce equilibrium output and decrease equilibrium product variety in the short run but taxes can raise output per product in the long run and induce entry excise taxes are overshifted into prices in a wide range of cases including under linear and concave demand conditions and excise taxes shift less than one for one into prices only when demand is highly convex multiproduct transactions substantively alter the efficiency of ad valorem and specific forms of excise taxes and affect the comparison of relative tax performance over short run and long run time horizons jel h25 h32 l11 l13 l81

the effects of taxation price control and government contracts in oligopoly and monopolistic competition abstract many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion or quantity of output to the government at a fixed price p r with the remainder being sold on the open market often this is combined with consumer rationing examples include cement and sugar in india and health housing and defence in many countries the paper investigates the effects of these schemes including sales and excise taxation on prices output and household welfare under oligopoly and monopolistic competition less government control reduced may raise prices and tax shifting can be above or below 100 percent

assessing horizontal mergers under uncertain efficiency gains the analysis of horizontal mergers hinges on a tradeoff between unilateral effects and efficiency gains we examine the role of uncertainty in this tradeoff in theory the attitude towards uncertainty depends on the curvature of the social objective function on the one hand adjustment effects both on the consumers and firms sides tend to make consumers surplus and firms profits convex on the other hand pass through effects may act in the opposite direction we show that convexity prevails in a number of situations including the most general linear demand model implications for empirical merger analysis are exposed

impact of cost shocks on consumer prices in vertically related markets the case of the french soft drink market we develop a structural econometric model of the vertical contracts between soft drink manufacturers and retailers to assess the impact of taxes or changes in production costs on consumer prices using individual data on food purchases from a representative survey of 19 000 french households in 2005 we estimate consumer demand using a random utility approach among a set of possible vertical relationships we select the model that best fits the data we evaluate the pass through rate of changes in input costs sugar or of taxes and show that the industry over shifts cost changes or excise taxes to the consumers this result challenges the belief that firms do not pass on the full extent of cost changes or excise taxes to consumers

the distributional incidence of the gasoline tax in chile abstract this paper analyzes the distributional incidence of the excise tax on gasoline in chile using household budget surveys the incidence is calculated with respect to both income and expenditure distributions in order to consider the potential differences between transitory and permanent income the suits index is estimated as a measure of the degree of progressivity of the tax and confidence intervals are calculated using a bootstrap methodology to statistically compare changes in the incidence given changes in the tax the results show that the tax contrary to the evidence for several developed countries is slightly or moderately progressive with a lower degree of progressivity observed in the calculations based on income than those based on expenditure the simulation of the 25 reduction in the tax rate implemented in 2008 shows that in terms of incidence its effect is to reduce the progressivity of the gasoline tax which is the opposite of what was sought by the government with this policy

welfare reductions from small cost reductions in differentiated oligopoly abstract this paper compares the welfare effects of cost reductions in differentiated bertrand and cournot oligopolies using a linear demand system the paper provides the critical levels of output shares below which a small cost reduction by a bertrand or cournot firm reduces welfare it then shows that the critical value is larger under bertrand competition than cournot competition

product quality consumption externalities and the role of national treatment abstract article iii of the wto national treatment limits domestic policy in an effort to curtail protectionist discrimination against foreign products in this paper we examine the role of national treatment and prominent article xx exceptions when goods are vertically differentiated and generate consumption externalities we study the domestic policy choices of two countries first stage problem and quantity and price equilibria in two product markets second stage problem under a strict application of article iii and compare them to the policy choices and product market equilibria prevailing when countries can misrepresent external damages and discriminate while one may expect that high externalities would lead to a greater need for exceptions to equal treatment we show that this is often not the case and furthermore that non discrimination can lead to a cleaner world environment

currency crises and the real economy the role of banks abstract this paper attempts to explain the divergent output effects of currency crises through a very simple and intuitive model that relates the effects of a devaluation not only to the financial fragility of banks but also to the degree of financial market imperfection the model shows that countries with higher degrees of financial market imperfection and or a banking sector whose balance sheets are weak in terms of having low net worth and high foreign currency exposure are much more likely to suffer a contraction in the wake of a currency crisis

the efficiency of indirect taxes under imperfect competition abstract this paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets we provide a simple proof that ad valorem taxes are welfare superior to unit taxes in the short run when production costs are identical across firms the proof covers differentiated products and a wide range of market conduct cost asymmetries strengthen the case for ad valorem taxation under cournot competition but unit taxation may be welfare superior under bertrand competition with product differentiation ad valorem taxation is superior with free entry under cournot competition but not necessarily under price competition when consumers value variety

efficiency and surplus bounds in cournot competition we derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under cournot competition to do so we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of concavity and convexity the more concave is demand the larger the share of producer surplus in overall surplus the smaller is consumer surplus relative to producer surplus and the lower the ratio of deadweight loss to producer surplus deadweight loss over total potential surplus is at rst increasing with demand concavity then eventually

optimal licensing of uncertain patents in the shadow of litigation this paper investigates the choice of a licensing mechanism by the holder of a patent whose validity is uncertain we provide sufficient conditions of a general nature under which the licensor prefers to use a per unit royalty contract in particular we show that this is the case for the holders of weak patents if the strategic effect of an increase in a potential licensee s unit cost on the equilibrium industry profit is positive the latter condition is shown to hold in a cournot resp bertrand oligopoly with homogeneous resp differentiated products under general assumptions on the demands faced by firms as a byproduct of our analysis we contribute to the literature on the cost paradox in oligopoly by offering some new insights of independent interest regarding the effects of cost variations on cournot and bertrand equilibria

how should commodities be taxed a supergame theoretic analysis abstract this paper studies the impact of commodity taxes on the sustainability of collusion in imperfectly competitive markets we consider both a cournot and a bertrand supergame with discounting with collusion being supported by either grim trigger strategies or stick and carrot optimal punishments we show that irrespective of firms choice variable and under both punishment schemes increased reliance on ad valorem taxation makes it easier for firms to sustain a collusive agreement contrary to the conventional wisdom according to which ad valorem taxation should be preferred on welfare grounds we find that welfare under specific taxation might be higher than welfare under ad valorem taxation the main conclusion of our analysis is that traditional welfare results on the comparison between ad valorem and specific taxation based on static models do not necessarily survive in a dynamic setting where the possibility of collusion among firms is taken into account in response to an increase in the ad valorem tax rate sufficiently patient firms might find it rational to form an implicit cartel which would not have existed otherwise

tax incidence in differentiated product oligopoly abstract we analyze the incidence of ad valorem and unit excise taxes in an oligopolistic industry with differentiated products and price setting bertrand firms both taxes may be passed on to consumers by more than 100 percent and an increase in the tax rate can increase short run firm profits and hence the long run number of firms we provide summary conditions for these effects to arise the conditions depend on demand curvatures and are written in elasticity form surprisingly the analysis largely corroborates cournot results with homogeneous demand

how to play 3 3 games a strategy method experiment abstract using the strategy method selten 1967 beitrage zur experimentellen wirtschaftsforschung pp 136 168 we elicit subjects strategies for playing any 2 person 3 3 game with integer payoffs between 0 and 99 in each of 5 tournaments every strategy pair plays 500 000 games the frequency of pure strategy equilibrium play increases from 51 in the first to 74 in the last tournament with the equilibria that maximize joint payoff being preferred when multiple exist for games without pure equilibria strategies are typically based on elements of the best reply cascade map maximize the expected payoff against uniformly randomizing opponents br map best reply to map and br br map best reply to br map

litigation and the value of tobacco companies this study determines how the recent wave of litigation affected returns and systematic risk in the tobacco industry we test for changes in stock prices coinciding with litigation announcements using a difference in difference event study methodology unfavorable information concerning litigation reduced tobacco returns we find a decline in systematic risk as traditionally measured by the covariance between industry returns and returns to a diversified efficient portfolio this decline may imply a substantial decline in the cost of equity capital of at least 2 2 after the period of litigation which we attribute to common cost shocks experienced by the companies participating in the master settlement agreement combined with the oligopolistic structure of the industry

a pareto comparison of ad valorem and unit taxes in noncompetitive environments abstract a literature that began with wicksell 1896 has shown that an ad valorem tax is welfare superior to an equal yield unit tax in both monopoly and oligopoly markets this paper proves a stronger result for any unit tax imposed on a monopoly there exists an ad valorem tax that pareto dominates it that produces larger profit tax revenue and consumer surplus the paper then considers whether this pareto result generalizes to all cournot nash oligopolies the paper shows that pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters

pass through rates and the price effects of mergers abstract we investigate the relationship in bertrand oligopoly between the price effects of mergers absent synergies and the rates at which merger synergies are passed through to consumers in the form of lower prices we find that the demand conditions that cause a merger to result in large price increases absent synergies also cause the pass through rate to be high the low estimated pass through rate and the relatively large predicted merger effect thus likely were inconsistent in an important u s merger case

understanding heterogeneity in price changes and firm responses to a national unhealthy food tax in mexico to address the high prevalence of overweight and obesity in mexico an eight percent ad valorem excise tax on non essential energy dense foods came into effect on 1 january 2014 this paper estimates price changes after the tax implementation among the top four food categories and by leading vs non leading firms using purchase information from over 6000 urban households in the 2012 2015 nielsen mexico consumer panel we create product city month specific prices that correct for potential biases associated with household and retailer characteristics using these corrected prices we conduct before and after quasi experimental analyses and find that price increases were larger than eight percent for cookies but were less than eight percent for ready to eat cereals salty snacks and pre packaged sweet bread for the latter food group event study analyses on the gradual price change over time suggest that price changes might be the result of an increasing price trend rather than the tax implementation firm level analyses mostly show that price increases by the leading firms were larger than the overall increase at the food market level helping explain variability in post tax declines in food purchases as reported in other research we also find that price changes are generally underestimated when we do not correct prices for biases associated with households and retailers these results improve our understanding of the mechanisms behind heterogeneous changes in purchases after the tax implementation additionally these results can assist policymakers when designing or improving taxes on non essential energy dense foods at a time when these policy options are high on the agenda in many places

fiscal policy and co2 emissions of new passenger cars in the eu to what extent have national fiscal policies contributed to the decarbonisation of newly sold passenger cars we construct a simple model that generates predictions regarding the effect of fiscal policies on average hbox co 2 emissions of new cars and then test the model empirically our empirical strategy combines a diverse series of data first we use a large database of vehicle specific taxes in 15 eu countries over 2001 2010 to construct a measure for the vehicle registration and annual road tax levels and separately for the hbox co 2 sensitivity of these taxes we find that for many countries the fiscal policies have become more sensitive to hbox co 2 emissions of new cars we then use these constructed measures to estimate the effect of fiscal policies on the hbox co 2 emissions of the new car fleet the increased hbox co 2 sensitivity of registration taxes have reduced the hbox co 2 emission intensity of the average new car by 1 3 partly through an induced increase of the share of diesel fuelled cars by 6 5 percentage points higher fuel taxes lead to the purchase of more fuel efficient cars but higher diesel fuel taxes also decrease the share of more fuel efficient diesel cars higher annual road taxes have no or an adverse effect

the comparison between ad valorem and specific taxation under imperfect competition abstract this paper compares ad valorem and specific taxation in two models of oligopoly with and without free entry predominantly ad valorem taxation implies a relatively low consumer price high tax revenue and when entry is precluded low profits ad valorem taxation dominates specific taxation from the welfare perspective the set of circumstances under which with free entry specific taxation raises welfare is a strict subset of that in which ad valorem taxation is welfare improving and in both models the maximisation of consumer welfare subject to a binding revenue constraint requires maximum reliance on ad valorem taxation

the distribution of harm in price fixing cases we consider a vertically related industry and analyze how the total harm due to a price increase upstream is distributed over downstream firms and final consumers for this purpose we develop a general model without making specific assumptions regarding demand costs or the mode of competition we consider both the case of homogeneous and differentiated goods markets and illustrate how basic intuition from the tax incidence literature carries over to the distribution of harm furthermore we discuss data requirements and suggest explicit formulas and regression specifications that can be used to estimate the relevant terms in the harm distribution in practice

bertrand supertraps we study oligopoly price competition between multiproduct firms firms whose products interact in the profit function specifically we focus on the impact of intrafirm product interactions on the level of equilibrium profits this impact may be decomposed in two different ways a a direct effect keeping the competitors actions fixed plus a strategic effect i e through the competitors actions or alternatively b a competitive advantage effect change in firmi only plus an imitation effect change in all other firms we derive conditions such that a the strategic effect more than outweighs the direct effect and conditions such that b the imitation effect more than outweighs the competitive advantage effect bertrand supertraps for example an increase in the degree of economies of scope would increase profits if prices were fixed or if the change were limited to firmi s cost function however if all firms increase the degree of economies of scope then all firms receive lower profits a variety of other applications is considered including learning curves core competencies demand synergies systems competition compatibility bundling network effects switching costs durable goods long term contracts

the advertising mix for a search good we extend the persuasion game to bring it squarely into the economics of advertising we model advertising as exciting consumer interest into learning more about the product and determine a firm s equilibrium choice of advertising content over quality information price information and horizontal match information equilibrium is unique whenever advertising is necessary the outcome is a separating equilibrium with quality unravelling lower quality firms need to provide more information for a given quality level as a function of consumer visit costs first quality information is disclosed then price information and then horizontal product information are added to the advertising mix some suggestive evidence is provided from airline ads in newspapers this paper was accepted by j miguel villas boas marketing

cost pass through in differentiated product markets the case of u s processed cheese in this paper we estimate a mixed logit model for demand in the u s processed cheese market the estimates are used to determine pass through rates of cost changes under different behavioral regimes we find that under collusion the pass through rates for all brands fall between 21 and 31 while under nash bertrand price competition the range of pass through rates is between 73 and 103 the mixed logit model provides a more flexible framework for studying pass through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types

price competition in u s brewing this study utilizes a brand level dataset that captures a unique natural experiment a 100 increase in the excise tax to evaluate different pricing models in the u s beer industry to assess the plausibility of different models the increase in marginal cost resulting from the tax increase is exploited observed prices in the post increase period are compared to the prices that should be observed under various pricing models three types of models are analyzed bertrand nash leadership and collusion results indicate that extreme cases of collusion can be confidently ruled out while several models may explain the observed prices equally well

indirect taxation in vertical oligopoly this paper analyzes the effects of specific and ad valorem taxation in an industry with downstream and upstream oligopoly we find that in the short run i e when the number of firms in both markets is exogenous the results concerning tax incidence tend to be qualitatively similar to models where the upstream market is perfectly competitive however both over and undershifting are more pronounced potentially to a very large extent instead in the long run under endogenous entry and exit overshifting of both taxes is more likely to occur and is more pronounced under upstream oligopoly as a result of this a tax increase is more likely to be welfare reducing we also demonstrate that downstream and upstream taxation are equivalent in the short run while this is not true for the ad valorem tax in the long run we show that it is normally more efficient to tax downstream

variety pass through an examination of the ready to eat breakfast cereal market abstract we examine variety pass through effects that occur when multiproduct retailers adjust the length of their product lines in response to changes in wholesale prices studying variety pass through is essential to understanding how wholesale price changes transmit into retail prices when variety is endogenous using data from the ready to eat breakfast cereal category we find that retailers jointly adjust retail prices and the length of their product lines in response to changes in wholesale prices we show the importance of controlling for the endogeneity of retailers product line decisions when calculating price pass through rates

tax incidence under oligopoly a comparison of policy approaches abstract this paper presents a methodological approach for the analysis of tax incidence that encompasses familiar forms of taxation in a general and analytically convenient model in oligopolistic industries the performance of a tax depends on the sensitivity of the unit tax rate to changes in industry output output elastic tax schedules are less likely to be over shifted and have superior welfare properties relative to regulatory instruments that are less responsive to the equilibrium market quantity for revenue neutral tax reforms the finding of delipalla and keen 1992 that ad valorem taxes welfare dominate specific taxes under oligopoly is derived as a special case of this general result

idiosyncratic shocks in an asymmetric cournot oligopoly abstract several authors have studied the impact of a marginal cost variation in the cournot model on consumers surplus firms profits and social welfare we unify and extend the results when all marginal costs change simultaneously hence we bring together two strands of literature respectively on mean preserving and subgroup common shocks the effect of any shock is decomposed into two parts an average impact ai and a heterogeneity effect he the former improves welfare if the inverse demand function is concave enough and the market is concentrated enough the latter when the diffusion of the shock is negatively correlated with the market share distribution finally we apply our decomposition to various special cases

cournot competition yields spatial agglomeration most theoretical models of spatial competition show a strong tendency toward spatial dispersion of firms yet common observations suggest that firms tend to agglomerate in this paper the authors show that competition between cournot type oligopolists that discriminate over space leads to spatial agglomeration one implication is that firms do not necessarily earn supernormal profits at the free entry equilibrium copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

more and cheaper haircuts after vat cut on the efficiency and incidence of service sector consumption taxes abstract consumption tax rates targeted at specific sectors are often reformed without any empirical knowledge about the efficiency of these policies this paper sheds light on tax incidence as well as the efficiency issue the potential for welfare improving reform by studying the impact of value added taxes vat on prices and quantities of labor intensive services i utilize a vat reform targeted at a specific service sector which creates a natural experiment set up the vat for hairdressing services in finland was reduced from 22 to 8 and the previous tax treatment still applied to other labor intensive services the choice of the treatment and control groups was exogenous to circumstances in finland since these groups were selected from a wider european setting the results suggest that hairdressers cut their prices only by half of what a complete pass through would have implied and that there was hardly any adjustment in equilibrium quantity due to the reform hairdressers were able to increase their profits significantly there is important heterogeneity in the results according to firm size

subsidizing and taxing business procurement abstract this paper studies the effect of a subsidy or tax on a market where a downstream manufacturer uses a competitive tender to procure inputs from upstream suppliers subsidizing input production can result in input price decreases that are greater than the effective decrease in marginal costs that is overshifting occurs when the size of the subsidy is not too large the downstream firm can enjoy an increase in profits greater than the government expenditure on the subsidy a relatively weak sufficient condition for these results to hold is that suppliers earn a positive profit margin on the marginal unit sold before taking into account any subsidy payment stronger sufficient conditions tailored to each result are provided

national treatment at the wto the roles of product and country heterogeneity this paper analyzes the world trade organization s wto s national treatment nt clause in a two country model where quality of goods and or market size are heterogenous across countries when market size is symmetric across countries a reciprocal nt agreement i benefits the high quality country ii hurts the low quality country and iii delivers higher aggregate world welfare however such an agreement can arise in equilibrium if the high quality country s market is relatively bigger and the quality gap between goods is small i e goods are sufficiently alike the qualitative nature of these results does not change when quality is endogenously determined

pricing in inflationary times the penny drops how does the frequency and magnitude of micro price rises and falls relate to macroeconomic crisis as well as moderation weekly micropricing behaviour in british groceries was investigated across three leading retailers over the moderation period 2004 7 and the crisis period 2008 10 we find significant price flexibility sharply distinguished from behaviour observed in most previous works downward price flexibility increased markedly in 2008 overall basket prices rise but significantly more individual prices fall than rise in the latter period tests of obfuscation in price setting suggested that large numbers of small price falls were used to disguise the basket price rises

newspaper differentiation and investments in journalism the role of tax policy many countries levy reduced rate indirect taxes on newspapers with proclaimed policy goals of stimulating investment in journalism and ensuring low newspaper prices however by taking into account the fact that the media industry operates in two sided markets we find the paradoxical result that the consequences of a low tax regime might be quite the opposite we also show that the low tax regime tends to increase newspaper differentiation if the advertising market is relatively small the newspapers might invest too little in journalism and be too differentiated from a social point of view in this case a tax increase will be welfare enhancing

implications of a sugar sweetened beverage ssb tax when substitutions to non beverage items are considered abstract using the 2006 homescan panel we estimate the changes in energy fat and sodium purchases resulting from a tax that increases the price of sugar sweetened beverages ssbs by 20 and the effect of such a tax on body weight in addition to substitutions that may arise with other beverages we account for substitutions between ssbs and 12 major food categories our main findings are that the tax would result in a decrease in store bought energy of 24 3 kcal per day per person which would translate into an average weight loss of 1 6 pounds during the first year and a cumulated weight loss of 2 9 pounds in the long run we do not find evidence of substitution to sugary foods and show that complementary foods could contribute to decreasing energy purchases despite their significantly lower price elasticity the tax has a similar effect on calories for the largest purchasers of ssbs

lechatelier samuelson principle in games and pass through of shocks abstract the lechatelier samuelson principle states that as a reaction to a shock an agent s short run adjustment of an affected action is smaller than its long run adjustment when the agent can also adjust other related actions we extend the principle to strategic environments where the long run adjustment also accounts for other players adjusting their strategies we show that the principle holds for supermodular games strategic complements satisfying monotone comparative statics and provide sufficient conditions for the principle to hold in games of strategic substitutes heterogeneity we discuss the principle s implications for cost pass through of multiproduct firms

commodity taxation and imperfect competition a note on the effects of entry abstract this paper looks at the effects of allowing the number of firms to vary in seade s model of oligopoly and taxation we show that the normative and positive consequences of a specific commodity tax are affected by entry in significant ways

vertical bargaining and retail competition what drives countervailing power this article investigates the effects of changes in market concentration on the equilibrium prices in a supply chain results are derived from a theoretical model of bilateral bargaining between upstream and downstream firms which allows for general forms of demand and retail competition whether countervailing buyer power arises in the form of lower input prices following greater concentration downstream depends on the pass through rate of input prices to retail prices countervailing buyer power generally does not translate into lower retail prices because of heightened market power at the retail level

from local to global competition abstract we introduce a framework that has known models of oligopolistic competition with differentiated products the circle the logit and the ces as limit cases this integrative approach incorporates both localized and global competition as well as price sensitive individual demands it is used to explain the impact of major changes over the last two centuries reductions in transport costs increased taste for variety population growth and use of technologies with greater returns to scale we work out the properties of an extended chamberlinian model with applications both in industrial organization and economic geography

tax incidence with strategic firms in the soft drink market abstract because soft drink sd consumption is considered to be a contributor to the epidemic of obesity there is a growing interest in evaluating the impact on sd consumption of alternative tax policies in this paper we propose a methodology to evaluate the impact of taxation of a food market taking into account the strategic price response of both manufacturers and retailers we apply this methodology to the french sd market and simulate the impacts of ad valorem and excise taxes we find that firms behave differently when facing an ad valorem tax or an excise tax an excise tax is overshifted to consumer prices while an ad valorem tax is undershifted to consumer prices we find that an excise tax based on the sugar content of sd is the most effective at reducing sd consumption our results also indicate that ignoring strategic pricing by firms leads to misestimations of the impact of taxation by between 15 and 40 depending on the products and the tax implemented in the short term that is ignoring positive long term health effects a 9 cents l excise tax has a small negative welfare effect about 1 person year

perfect competition urbanization and tax incidence in the retail gasoline market i introduction in applied tax incidence studies it is typically assumed that prices respond one for one to changes in sales and excise taxes chernick and reschovsky 1997 pechman 1985 shepard 1976 state of wisconsin department of revenue 2004 wiese rose and schluter 1995 zupnick 1975 is this assumption reasonable despite the fundamental role of tax incidence in the study of public finance there is surprisingly little empirical analysis that sheds light on who bears the burden of taxes in this article we examine the incidence of state gasoline excise taxes using monthly price data for all 50 states in the united states over the period 1984 1999 our estimation results generally indicate full shifting of gasoline taxes to the final consumer with changes in gasoline taxes fully reflected in the tax inclusive gasoline price almost instantly we also find that the incidence of excise taxes depends on the competitiveness of retail gasoline markets e g urban vs rural markets gasoline markets in urban states typically exhibit full shifting but those in rural states demonstrate somewhat less than full shifting although the issue of sales and excise tax incidence has received considerable attention over the years most research has focused on tax incidence theory and the standard conclusion of much of this theoretical analysis is that consumers bear the full burden of any sales and excise taxes 1 based primarily on this theoretical foundation most applied incidence studies assume that sales and excise taxes are fully reflected in consumer prices and the distribution of tax burdens across income classes necessarily reflects this assumption however actual empirical testing of this assumption of full forward shifting has been surprisingly sparse 2 in important recent research poterba 1996 and besley and rosen 1999 have conducted empirical analyses of the incidence of excise taxes poterba 1996 uses city specific clothing and personal care price data covering the 1947 1977 and the 1925 1939 periods to examine the degree to which state and local retail sales taxes are shifted to consumers with two data sets based on bureau of labor statistics bls city specific consumer price indices using these bls data on tax inclusive prices poterba 1996 constructs quarterly price indices for each of 28 standard metropolitan statistical areas smsas many of these 28 smsas experienced significant changes in sales tax rates and poterba 1996 uses these tax shocks to determine the incidence of sales taxes his estimation results are somewhat variable but in general he finds for the postwar period that taxes are fully shifted to consumers in some cases he finds limited evidence of overshifting although it is never possible to reject the null hypothesis that prices rise point for point with the changes in the tax and he also finds that full shifting typically though not always occurs in the first quarter of the tax change poterba 1996 also examines tax incidence for individual smsas during the depression era and his results indicate significant differences across metropolitan areas in the degree of tax shifting for example prices on women s clothing in chicago show significant overshifting but atlanta shows negative shifting a result that does not seem plausible besley and rosen 1999 also examine the incidence of sales taxes using price data for 12 narrowly defined commodities in 155 different u s cities using quarterly price data for the period 1982 1990 issued by the american chamber of commerce researchers association accra 3 they not only find full shifting for a number of commodities but also find overshifting for more than half the products a result they attribute to imperfect competition in the retail sector while this recent empirical research has significantly expanded our understanding of the actual nature of sales and excise tax incidence we believe that our work here on gasoline excise taxes makes several contributions to the empirical literature

carbon tax emission standards and carbon leak under price competition we consider a two country model of price competition with one polluting firm in each country and differentiated products assuming away to simplify abatement efforts and input substitution we compare the impact on output leakages and trade volumes of a carbon tax versus an emission standard policy unilaterally enacted by the home country under the tax the two firms set their prices simultaneously in a bertrand game under the standard the home firm s price is conditioned on the price of the foreign firm so as to abide the emission constraint as a result the tax leads to higher leakages and global emissions than the standard the standard also implies a better trade balance for the home country than the tax

market substitution and the pareto dominance of ad valorem taxation 1 introductionexcise taxes take two basic forms unit taxes based on quantity sold and ad valorem taxes based on sales value while these two versions of excise taxes are equivalent in perfectly competitive markets 1 in noncompetitive markets ad valorem taxation has been shown to welfare dominate unit taxation 2ad valorem taxation also pareto dominates unit taxation in monopoly and in some cases oligopoly markets in the sense that under an isorevenue constraint replacing unit taxation with ad valorem taxation increases both consumer welfare and producer profits skeath and trandel 1994 3in this paper we depart from the homogeneous product oligopoly markets assumed in previous literature by adopting a model of heterogeneous products developed by dixit and stiglitz 1977 first we study the pareto dominance of ad valorem taxation in short run equilibrium where a fixed number of firms produce imperfectly substitutable goods and engage in bertrand competition we define market demand as a weighted sum of firm quantities demanded and market price as a similarly weighted average of firm prices by assuming that market demand is isoelastic with respect to market price our framework allows the elasticity of substitution among the goods in the taxed market and the price elasticity of market demand to bear on the comparison of the two forms of excise taxes we find that in the short run ad valorem taxation always dominates unit taxation both in terms of consumer welfare and overall welfare the precise meaning of overall welfare is made clear later however pareto dominance of ad valorem taxation never exists if market demand is inelastic because in this case firms always earn lower profits under ad valorem taxation restricting our analysis to the case where market demand is elastic we find that ad valorem taxation pareto dominance is more likely the smaller the within market elasticity of substitution or the larger the market demand elasticity we also generalize a prior result for homogenous products increasing the number of firms in a market decreases the likelihood of ad valorem taxation pareto dominance finally we find that for a sufficiently large within market elasticity of substitution ad valorem taxation pareto dominance is more likely the smaller the tax level contrary to an existing result for the homogenous product case given the results of previous literature that unit taxation tends to be welfare dominated by equal revenue ad valorem taxation in noncompetitive environments the existence of both types of taxes must be explained by nonoptimal behavior on the part of government 4 one possible explanation for the coexistence of unit and ad valorem taxes despite the welfare dominance of ad valorem taxation is that a government only cares about the amount of revenue collected from each market and the choice between these two taxes in a specific market is dictated by producers interests which are more concentrated than consumers interests in general given this hypothesis concerning the political economy of choice between the two major forms of excise taxes the results of this paper make testable predictions with respect to how the relative desirability of ad valorem taxation from the perspective of producers changes with several important characteristics of a market the elasticity of substitution among goods in the market the market demand elasticity the number of firms in the market and the level of taxation in the market extending our analysis to long run equilibrium where entry and exit provides an additional market equilibrating mechanism and where firms always earn zero profits we show that an equal revenue switch from unit to ad valorem taxation has welfare effects on consumers through two channels

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

market structure and casino taxation in tourist resorts this article examines the association of tax effects with market structure for casino gaming we show that if market structure is uncompetitive much of casino taxation falls on tourists whose demand is inelastic relative to supply the tax is likely to be efficient under strong external demand if imposed on oligopoly casinos with a monopoly location in a cross border market the likelihood of economically good taxation is greater under oligopoly than under competition but lower than under monopoly casino taxes should be lowered in a more competitive market with weaker external demand our prediction is consistent with the evidence found from casino tourism development in macao with high gambling taxes

product differentiation and oligopoly in international markets the case of the u s automobile industry this paper develops and estimates a model of the u s automobile industry on the demand side a discrete choice model is adopted that is estimated using micro data from the consumer expenditure survey the estimation results are used in conjunction with population weights to derive aggregate demand on the supply side the automobile industry is modelled as an oligopoly with product differentiation equilibrium is characterized by the first order conditions of the profit maximizing firms the estimation results are used in counterfactual simulations to investigate two trade policy issues the effects of the ver and exchange rate pass through

vertical tax competition and consumption externalities in a federation with lobbying abstract we consider a federation with two layers of government in which leviathan policy makers levy an excise tax on a consumption good that generates a negative externality and that is produced in an imperfectly competitive market when both layers of government are allowed to tax policy choices are affected also by vertical tax competition in this setting tax policy in general is not efficient we then examine how special interest groups may influence tax policy by lobbying the policy makers we find that depending on market structure and on the level of the externality lobbying can improve efficiency and that tax base sharing by two layers of government can be more efficient than taxation by a single layer

property tax shifting under imperfect competition the hedonic price models are commonly used to empirically assess the degree to which property taxes are shifted from property owners to property renters the findings of these studies vary sporadically in terms of the degree of tax shifting the competitiveness of housing markets may significantly influence the degree of tax shifting in this article we allow a nonzero price cost markup in the hedonic price equation and examine the impact of market power on property tax shifting in our case study we examine the property specific characteristics occupancy record and local property tax associated with hundreds of managed rental properties in central new hampshire the results show that depending on the degree of market power exercised by a property management firm the anti competitive structure of the market may significantly contribute to property tax shifting from property owners to property renters