Taxation and Market Power

K.A. Konrad, F. Morath, W. Müller

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Abstract

We analyze the incidence and welfare e¤ects of unit sales taxes in experimental monopoly and Bertrand markets. We nd, in line with economic theory, that rms with no market power are able to shift a high share of a tax burden on to consumers, independent of whether buyers are automated or human players. In monopoly markets, a monopolist bears a large share of the burden of a tax increase. With human buyers, however, this share is smaller than with automated buyers as the presence of human buyers constrains the pricing behavior of a monopolist.
Original languageEnglish
Place of PublicationTilburg
PublisherMicroeconomics
Number of pages43
Volume2010-03
Publication statusPublished - 2010

Publication series

NameCentER Discussion Paper
Volume2010-03

Keywords

  • tax incidence
  • monopoly
  • Bertrand competition
  • experiment

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