Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy

28 Pages Posted: 9 Jun 2016

See all articles by Paul Belleflamme

Paul Belleflamme

CORE and Louvain School of Management, UCL (Université Catholique de Louvain); CESifo (Center for Economic Studies and Ifo Institute)

Eric Toulemonde

IZA Institute of Labor Economics; Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences

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Date Written: May 2016

Abstract

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

Belleflamme, Paul and Toulemonde, Eric, Tax Incidence on Competing Two-Sided Platforms: Lucky Break or Double Jeopardy (May 2016). CESifo Working Paper Series No. 5882. Available at SSRN: https://ssrn.com/abstract=2791364

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Eric Toulemonde

IZA Institute of Labor Economics ( email )

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