Amir, Rabah
Maret, Isabelle
Troge, Michael
This paper investigates the pass-through of an excise tax imposed on a monopoly firm with constant marginal cost. The optimal price increases as tax increases for any demand function. Tax pass-through is globally under or in excess of 100% according as the direct demand function is log-concave or log-convex. The analysis relies on supermodular optimization and delivers conclusions based on minimal sufficient assumptions in a simple, broadly accessible and self-contained framework. Further results allow for mixed conditions that provide precise and local determination of pass-through. Several illustrative examples are given. Policy conclusions relating to the relative wisdom of taxing high versus low cost monopoly firms are drawn from the results.
Bibliographic reference |
Amir, Rabah ; Maret, Isabelle ; Troge, Michael. On taxation pass-through for a monopoly firm. ECON Discussion Papers ; 2004/70 (2004) |
Permanent URL |
http://hdl.handle.net/2078.1/4768 |