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Consumption taxes in monopolistic competition: A comment created by Henrik Vetter

By: Material type: TextTextSeries: Journal of Economics ; Volume 110, number 3Heidelberg: Springer, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 09318658
Subject(s): LOC classification:
  • HB171.5 JOU
Online resources: Abstract: 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.
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Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Journal Article Journal Article Main Library - Special Collections HB171.5 JOU (Browse shelf(Opens below)) Vol. 110, no. 3 (pages287-296) SP21441 Not for loan For In house Use

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.

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