Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2009/9: On Revenue and Welfare Dominance of Ad Valorem Taxes in Two-Sided Markets

Hans Jarle Kind (), Marko Koethenbuerger () and Guttorm Schjelderup ()
Additional contact information
Hans Jarle Kind: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Marko Koethenbuerger: Department of Economics, University of Copenhagen, Postal: University of Copenhagen, Department of Economics, Ă˜ster Farimagsgade 5, 1353 Copenhagen K, Denmark
Guttorm Schjelderup: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: A benchmark result in public economics is that it is possible to increase both tax revenue and welfare by making a monopoly subject to ad valorem taxes rather than unit taxes. We show that such revenue and welfare dominance does not hold in two-sided markets.

Keywords: Ad Valorem Taxes; Unit Taxes; Two-Sided Markets; Revenue-Dominance; Welfare-Dominance; Monopoly

JEL-codes: D40; H20; L10

8 pages, September 15, 2009

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