Soda tax incidence and design under monopoly

Cremer, Helmuth, Goulão, Catarina and Lozachmeur, Jean-Marie (2019) Soda tax incidence and design under monopoly. TSE Working Paper, n. 19-992, Toulouse

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Official URL: http://tse-fr.eu/pub/122814

Abstract

We consider an unhealthy good, such as a sugar-sweetened beverage, the health damages of which are misperceived by consumers. The sugar content is endogenous. We first study the solution under “pseudo” perfect competition. In that case a simple Pigouvian tax levied per unit of output but proportional to the sugar content is sufficient to achieve a first best solution. Then we consider a monopoly. Market power affects both output and sugar content, possibly in opposite directions, and these effects have to be balanced against Pigouvian considerations. We show that, nevertheless, a tax per unit of output achieves an efficient solution, but it must be an affine function of the sugar content; taxing “grams of sugar” is no longer sufficient. Interestingly, both the total tax as well as its sugar component can be positive as well as negative.

Item Type: Monograph (Working Paper)
Language: English
Date: February 2019
Place of Publication: Toulouse
Uncontrolled Keywords: sin tax, sin tax, tax incidence, tax incidence, misperception, misperception, monopoly, monopoly
JEL codes: D42 - Monopoly
H22 - Incidence
I12 - Health Production - Nutrition, Mortality, Morbidity, Suicide, Substance Abuse and Addiction, Disability, and Economic Behavior
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 19 Feb 2019 09:25
Last Modified: 20 Mar 2019 09:08
OAI ID: oai:tse-fr.eu:122814
URI: http://publications.ut-capitole.fr/id/eprint/31471

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