Tax responses in platform industries
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Tax responses in platform industries. / Kind, Hans Jarle; Köthenbürger, Marko; Schjelderup, Guttorm.
I: Oxford Economic Papers, Bind 62, Nr. 4, 2010, s. 764-783.Publikation: Bidrag til tidsskrift › Tidsskriftartikel › Forskning › fagfællebedømt
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TY - JOUR
T1 - Tax responses in platform industries
AU - Kind, Hans Jarle
AU - Köthenbürger, Marko
AU - Schjelderup, Guttorm
N1 - JEL classification: D4, D43, H21, H22, L13
PY - 2010
Y1 - 2010
N2 - 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 result of tax incidence is that consumers of a more heavily taxed good pay a higher price and thus buy less of the good. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher ad valorem tax may lower end-user prices and spur sales. Thus, two-sided platform firms may not at all engage in tax shifting via price increases. We further show that a higher ad valorem tax may undermine a firm's incentive to differentiate its product from that of its competitors. Finally, we demonstrate that the effects of increasing specific taxes may be the opposite of those of increasing value added taxes.
AB - 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 result of tax incidence is that consumers of a more heavily taxed good pay a higher price and thus buy less of the good. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher ad valorem tax may lower end-user prices and spur sales. Thus, two-sided platform firms may not at all engage in tax shifting via price increases. We further show that a higher ad valorem tax may undermine a firm's incentive to differentiate its product from that of its competitors. Finally, we demonstrate that the effects of increasing specific taxes may be the opposite of those of increasing value added taxes.
U2 - 10.1093/oep/gpq008
DO - 10.1093/oep/gpq008
M3 - Journal article
VL - 62
SP - 764
EP - 783
JO - Oxford Economic Papers
JF - Oxford Economic Papers
SN - 0030-7653
IS - 4
ER -
ID: 17523412