Discussion Papers, Department of Finance and Management Science, Norwegian School of Economics (NHH)
No 2007/3:
Taxation in Two-Sided Markets
Hans Jarle Kind ()
, Marko Koethenbuerger ()
and Guttorm Schjelderup ()
Abstract: Two-sided platform firms serve distinct customer groups
that are connected through interdependent demand, and include major
businesses such as the media industry, banking, and the software industry.
A well known textbook result in one-sided markets is that a government may
increase a monopolist’s output and reduce the deadweight loss by
subsidizing output. The present paper shows that this result need not hold
in a two-sided market. On the contrary, a higher advalorem tax rate -
rather than a subsidy - could increase output and enhance welfare.
Keywords: Two-sided markets; ad-valorem taxes; specific taxes; imperfect competition; industrial organization; (follow links to similar papers)
JEL-Codes: D40; D43; H21; H22; L13; (follow links to similar papers)
31 pages, February 13, 2007
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