Taxation and market power

Konrad, Kai A.; Morath, Florian and Müller, Wieland (2014): Taxation and market power. In: Canadian Journal of Economics, Vol. 47, No. 1: pp. 173-202

Abstract

We analyze the incidence and welfare effects of unit sales tax increases 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 the tax burden 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 behaviour of a monopolist. Several control treatments corroborate this finding. © Canadian Economics Association.

• Item Type: Journal article
• Form of publication: Publisher's Version
• Keywords: economic theory; market system; monopoly; price dynamics; tax system
• Faculties: Economics; Economics > Chairs > MPI for Tax Law and Public Finance
• Subjects: 300 Social sciences > 330 Economics
• ISSN: 0008-4085
• Language: English