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Taxation and Market PowerKai A. KonradMax Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA) Florian MorathMax Planck Institute for Tax Law and Public Finance Wieland MüllerTilburg University - Department of Economics; University of Vienna - Faculty of Business, Economics, and Statistics December 2009 CESifo Working Paper Series No. 2880 Abstract: We analyze the incidence and welfare effects of unit sales taxes in experimental monopoly and Bertrand markets. We find, in line with economic theory, that firms 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.
Number of Pages in PDF File: 47 Keywords: tax incidence, monopoly, Bertrand competition, experiment JEL Classification: H22, L12, L13, C72, C92 working papers seriesDate posted: January 9, 2010Suggested CitationContact Information
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