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

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

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

nonparametric tests of market structure an application to the cigarette industry the revealed preference approach is used to construct a nonparametric test of the monopoly model and some simple generalizations of it and the test is applied to data for the cigarette industry it exploits the maintained hypothesis that variations in the excise tax charged on a package of cigarettes allow us to assess seller reactions to common exogenous variations in marginal cost results indicate that the monopoly hypothesis and other simple models that do not embody at least a moderate amount of competition serve as poor predictors of the effects of excise tax changes on cigarette prices sales and revenues copyright 1987 by blackwell publishing ltd

testing hypotheses about firm behavior in the cigarette industry data on the effects of excise taxes are used to investigate the level of competition in the cigarette industry a lower bound on the numbers equivalent of firms in the context of the conjectural variations model is derived and estimated results point to at least a moderately high level of competition and in particular allow for the rejection of the perfect cartel model this paper relies on comparative statics results and hence circumvents recent criticisms of a study of monopoly behavior in the cigarette industry

measurement of monopoly behavior an application to the cigarette industry a simple scheme is proposed to measure monopoly pricing behavior the coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost no direct measurement of costs is required so a major problem for other empirical studies of monopoly is avoided empirical results for cross section time series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry the model represents an alternative interpretation of related results in a recent paper by barzel application of the methodology to other markets is feasible

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

commodity taxation in a differentiated oligopoly the authors introduce commodity taxation into a vertical differentiation model with endogenous product selection they show that a uniform ad valorem tax lowers both qualities distorts the allocation of consumers between firms and lowers the consumer prices of both variants a small uniform tax is always welfare improving over the no tax equilibrium a differentiation of tax rates may or may not be desirable on welfare grounds if a welfare improvement is possible through a nonuniform tax it is always the high quality variant that must be taxed at a higher rate copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

rationing and adjustment in the market for tenancies the behavior of landowning households in thanjavur district a large proportion of peasants cultivate only their own land even when there are active markets for tenancies as well as labor however rationing of tenancies can occur under moral hazard or adverse selection a model that includes as possible outcomes both rationing and full adjustment through trading is analyzed and estimated using data from south india on this basis households can be characterized as rationed or adjusted and confidence intervals for these assignments can be calculated while some households achieved full adjustment a majority were rationed in the tenancy market many of them completely

who pays sales taxes evidence from french vat reforms 1987 1999 the point of this paper is to provide visual evidence of tax shifting and to measure empirically the distribution of the sales tax burden between consumers and producers for that purpose two french reforms are studied these reforms entail steep decreases of the vat rate september 1st 1987 the vat rate on car sales went down from the luxury rate of 33 33 to the full rate of 18 6 september 1st 1999 the vat rate on housing repair services went down from the full rate of 20 6 to the reduced rate of 5 5 the consumer share of the sales tax burden is 57 in the new car sales market and 77 in the housing repair services market

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

testing static oligopoly models conduct and cost in the sugar industry 1890 1914 we explore the widespread methodology of using demand information to infer market conduct and unobserved cost components under the hypothesis of static oligopoly behavior direct measures of marginal cost and conduct indicating small market power serve as benchmarks the more competitive models yield better cost estimates the best cost estimates occur when conduct is estimated as a free parameter which in turn only slightly underestimates our direct measure it also tracks the decline in market power accompanying the industry s structural changes the methodology is largely validated although partial cost information can improve its predictive power conclusions are robust to demand function

estimating tax incidence market power and market conduct the european cigarette industry abstract recent theoretical work has shown that the incidence of ad valorem and specific taxes may differ and each may be over or under shifted onto consumers in the presence of imperfect competition these results are used to derive a method of estimating market power and conduct an application is made to the european cigarette industry previous empirical comparison of the incidence of ad valorem and specific taxes is limited for a group of countries with broadly similar cigarette industries there is evidence of undershifting of both taxes with the specific tax having a significantly greater impact on price the extremes of both perfect competition and monopoly can be rejected behaviour is no less competitive than the equivalent of cournot

tax incidence under imperfect competition comment abstract delipalla and o donnell 2001 contains a formula for the incidence of specific and ad valorem taxes in a conjectural variation oligopoly model with potentially asymmetric firms the formula is incorrect we derive the correct formula and provide a discussion of the error and its implications for empirical studies of pass through

the gender wage gap in experimental labor markets abstract we analyze the gender wage gap in experimental markets women receive but do not request significantly lower wages than men this hurts firms as women react with low effort additionally women tend to react differently than men to wage levels

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

are alcohol tax hikes fully passed through to prices evidence from alaska on 1 october 2002 the state of alaska increased taxes on malt beverages from 0 35 per gallon to 1 07 per gallon increased taxes on wine from 0 85 per gallon to 2 50 per gallon and increased taxes on distilled spirits from 5 60 per gallon to 12 80 per gallon the net effect is that the tax on a standard serving rose from about 3 cents for beer 2 cents for wine and 4 cents for spirits to a uniform tax of 10 cents per standard serving of each type of alcohol beverage this paper uses primary data on alcoholic beverage prices in alaska to study a very basic question what was the impact of the tax hikes on prices an alcohol tax hike is often viewed as a public health policy tool to discourage excessive alcohol consumption and alcohol related problems such as drunk driving the impact of a tax hike on alcoholic beverage prices is a key link in the chain of the causality from the tax to public health economic theory and previous empirical studies mainly of taxes on goods other than alcoholic beverages do not provide very much guidance on what to expect following a tax hike it is an empirical question to answer the question i conducted telephone surveys just before and a year after the tax hike of on premise and off premise alcohol retail establishments across alaska

a note on the effect of cost changes on prices in a recent article in this journal sumner 1981 took an ingenious approach to estimating the level of monopoly power in the cigarette industry he noted that differences in marginal costs exist in the industry due to varying levels of state taxes the sales prices established will satisfy the equation p i liq l mr mc where p price and q the elasticity of demand for the product in question if elasticity is a constant observing the change in marginal cost and the change in price enables one to infer the elasticity of demand perceived by the firm elasticity could then be used as a proxy for the firm s market power this technique turns out to be of very limited applicability however because it is extremely sensitive to the functional form assumed for the demand curve consider the general problem of a firm facing constant marginal costs of c in maximizing profits the firm solves

serial correlation and the fixed effects model this paper generalizes the durbin watson type statistics to test the ols residuals from the fixed effects model for serial independence also generalized are the tests proposed by sargan and bhargava for the hypothesis that the residuals form a random walk a method for efficient estimation of the parameters is also developed finally an earnings function is estimated using the michigan survey of income dynamics in order to illustrate the uses of the tests and the estimation procedures developed in this paper

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

taxation and product quality new evidence from generic cigarettes in this journal barzel 1976 theorized that per unit taxes should increase the average quality of a product whereas ad valorem taxes may either lower product quality or leave it unaffected there are several different ways to present the logic behind this theory barzel stresses that per unit taxes do not tax all attributes of a commodity causing a substitution from the taxed attributes quantity into the others quality 1 another way is to draw an analogy to the alchian and allen 1964 theorem where the addition of a fixed fee causes a decrease in the relative price of the higher quality version of the product 2 because ad valorem taxes add the same percentage to the prices of both the highand low quality versions of the product they do not distort relative prices thus ad valorem taxes should

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

oligopoly structure and the incidence of cigarette excise taxes abstract a model of oligopoly price behavior and tax incidence for the u s cigarette industry for the period 1955 1990 is presented a cost function is estimated and shows manufacture to be subject to increasing returns to scale the mean price elasticity of demand is 0 71 the model indicates that competition among manufacturers has been decreasing since 1980 a simulation shows that an increase in the federal excise tax causes a greater increase in price and a greater decrease in consumption than does the same increase in the average of state and local tax rates

tax changes and cigarette prices the recurring question of the difference between specific and ad valorem taxes has recently been revived by barzel 1976 who argued p 1185 that when quality is not fully controlled the effects of the two types of taxes differ radically the excise tax induces a substitution of quality for quantity resulting in a greater increase in the price per unit than predicted by the constant quality model the ad valorem tax induces a reduction in quality and lower after tax price than predicted evidence consistent with these hypotheses is found in the response of cigarette prices to tax changes in the further tests reported by johnson 1978 prices rise significantly less than the tax in new hampshire where the state tax was ad valorem and significantly more in the remaining states which impose specific taxes the purpose of this note is to question not barzel s analysis but rather the interpretation of the evidence on the pedestrian grounds of implausibility as barzel himself observes p 1194 n 32 the size of new hampshire makes it unlikely that cigarettes would be tailormade for it the scope for removing characteristics is quite limited then the scope for adding characteristics in other states seems equally limited to avoid misunderstanding it should be emphasized that the hypothesized variations in quality are a supply side phenomenon not a demand side response to the relative cheapening of superior brands when a specific tax is increased johnson s estimates imply that the 90 increase in the new hampshire tax over the period 1954 76 should have reduced the net price by 3 6 ceteris paribus the slightly larger mean tax increase in the remaining 48 continental states should have raised net price by 0 90 what changes in the quality of the services sold with cigarettes could have justified such a differential what are the observable counterparts of the tax changes in the absence of a convincing answer to those questions the estimated response of cigarette prices to taxes represents a fact in search of a theory

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