Oligopoly Deregulation and the Taxation of Commodities

23 Pages Posted: 3 Jan 2003 Last revised: 28 Jan 2003

See all articles by Gilbert E. Metcalf

Gilbert E. Metcalf

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

George Norman

Tufts University - Department of Economics

Date Written: January 2003

Abstract

We examine the interplay between market structure and the form that commodity taxation should take in a world in which firms produce differentiated products and so are able to exert some degree of market power. Our analysis takes explicit account of two important recent developments that carry significant implications for market structure and so for the appropriate design and effectiveness of commodity taxation: market deregulation and technological change. In the presence of price discrimination, we find that tax policy loses much of its effectiveness at serving as a substitute for direct regulation. Moreover, in cases where taxes can influence market structure, subsides rather than taxes may be required to achieve optimum market structure.

Suggested Citation

Metcalf, Gilbert E. and Norman, George, Oligopoly Deregulation and the Taxation of Commodities (January 2003). NBER Working Paper No. w9415. Available at SSRN: https://ssrn.com/abstract=366452

Gilbert E. Metcalf (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-3685 (Phone)
617-627-3917 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

George Norman

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

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