Taxation and market power

Author(s)
Wieland Müller, Kai Konrad, Florian Morath
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.

Organisation(s)
Department of Economics, Vienna Center for Experimental Economics
External organisation(s)
Max-Planck-Institut für Steuerrecht und Öffentliche Finanzen
Journal
Canadian Journal of Economics
Volume
47
Pages
173-202
No. of pages
30
DOI
https://doi.org/10.1111/caje.12067
Publication date
02-2014
Peer reviewed
Yes
Austrian Fields of Science 2012
502047 Economic theory
ASJC Scopus subject areas
Economics and Econometrics
Portal url
https://ucrisportal.univie.ac.at/en/publications/0bcbe0e4-3a93-47a9-be1a-bde0af31a034