Consumption taxes in monopolistic competition: A comment
Vetter Henrik
Consumption taxes in monopolistic competition: A comment created by Henrik Vetter - Journal of Economics Volume 110, number 3 .
We show that an ad valorem tax is better than an equal-revenue unit tax when consumers spend some fixed proportion of income on taxed goods, when firms use constant mark-up pricing, and entry and exit drive per-firm profit to zero. These key assumptions implies that ad valorem taxes are superior in oligopoly as well as monopolistic competition, showing that earlier results on taxes in monopolistic competition (Schröder in J Econ 83(3):281–292, 2004) are not due to the mode of competition, but rather are due to the functional forms used.
09318658
Unit taxes--Mark-up pricing--Monopolistic competition
HB171.5 JOU
Consumption taxes in monopolistic competition: A comment created by Henrik Vetter - Journal of Economics Volume 110, number 3 .
We show that an ad valorem tax is better than an equal-revenue unit tax when consumers spend some fixed proportion of income on taxed goods, when firms use constant mark-up pricing, and entry and exit drive per-firm profit to zero. These key assumptions implies that ad valorem taxes are superior in oligopoly as well as monopolistic competition, showing that earlier results on taxes in monopolistic competition (Schröder in J Econ 83(3):281–292, 2004) are not due to the mode of competition, but rather are due to the functional forms used.
09318658
Unit taxes--Mark-up pricing--Monopolistic competition
HB171.5 JOU