In oligopoly, comparison of the tax pass-through favors the use of ad valorem taxes compared to unit taxes. We argue that, in addition to differences in tax pass-through, the two taxes have a dissimilar effect on firms' strategic interaction. The anticompetitive effects of the two taxes favor unit taxes over ad valorem taxes. We show both when there is a preference for unit taxation and when it is likely that the conventional preference for ad valorem taxation is upheld.
|Journal||Public Finance Review|
|Number of pages||19|
|Publication status||Published - 2014|