Abstract.
We study the relationship between commodity taxation and the effect of entry with imperfect competition. We develop a simple general equilibrium model with imperfect competition in which consumers have variety preferences. As a result, we see that introducing specific taxes increases social welfare. Furthermore, we show that the optimal tax rule is contrary to the inverse elasticity rule.
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Acknowledgement We wish to thank two anonymous referees for their helpful comments.
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Doi, J., Futagami, K. Commodity Taxation and the Effects of Entry: A Case of Variety Preferences. JEcon 83, 267–279 (2004). https://doi.org/10.1007/s00712-004-0083-9
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DOI: https://doi.org/10.1007/s00712-004-0083-9