Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy
28 Pages Posted: 9 Jun 2016
Date Written: May 2016
We consider the effects of taxes for competing two-sided platforms. We first detail how a platform passes a tax increase on its prices. Adding price competition, we study next how the tax affects profits. Because of the strategic implications of the cross-side external effects, the tax increase may end up increasing the profit of the taxed platform (lucky break) or, conversely, reducing it twice (double jeopardy).
Keywords: two-sided platforms, taxation, pass-through
JEL Classification: D430, L130, L860, O320
Suggested Citation: Suggested Citation