Taxation and Market Power

47 Pages Posted: 9 Jan 2010

See all articles by Kai A. Konrad

Kai A. Konrad

Max Planck Institute for Tax Law and Public Finance; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Florian Morath

Goethe University Frankfurt; Max Planck Institute for Tax Law and Public Finance

Wieland Müller

University of Vienna, Department of Economics & VCEE; Tilburg University, Department of Economics & CentER

Multiple version iconThere are 3 versions of this paper

Date Written: December 2009

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.

Keywords: tax incidence, monopoly, Bertrand competition, experiment

JEL Classification: H22, L12, L13, C72, C92

Suggested Citation

Konrad, Kai A. and Morath, Florian and Müller, Wieland, Taxation and Market Power (December 2009). CESifo Working Paper Series No. 2880. Available at SSRN: https://ssrn.com/abstract=1532669

Kai A. Konrad (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/pub/home.cfm

Centre for Economic Policy Research (CEPR)

90-98 Goswell Road
London, EC1V 7RR
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, 81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, 53072
Germany

Florian Morath

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

Wieland Müller

University of Vienna, Department of Economics & VCEE ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

HOME PAGE: http://https://homepage.univie.ac.at/wieland.mueller/

Tilburg University, Department of Economics & CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/w.mueller-3.htm

Register to save articles to
your library

Register

Paper statistics

Downloads
40
Abstract Views
410
PlumX Metrics