Optimum commodity taxation in pooling equilibria

Arbeitspapier

This paper extends the standard model of optimum commodity taxation (Ramsey (1927) and Diamond-Mirrlees (1971)) to a competitive economy in which some markets are inefficient due to asymmetric information. As in most insurance markets, consumers impose varying costs on suppliers but firms cannot associate costs to customers and consequently all are charged equal prices. In a competitive pooling equilibrium, the price of each good is equal to average marginal costs weighted by equilibrium quantities. We derive modified Ramsey- Boiteux Conditions for optimum taxes in such an economy and show that they include general-equilibrium effects which reflect the initial deviations of producer prices from marginal costs, and the response of equilibrium prices to the taxes levied. It is shown that condition on the monotonicity of demand elasticities enables to sign the deviations from the standard formula. The general analysis is applied to the optimum taxation of annuities and life insurance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 1815

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Taxation and Subsidies: Efficiency; Optimal Taxation
• Subject: Asymmetrische Information ; Optimale Besteuerung ; Verbrauchsteuer ; Abzinsung ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sheshinski, Eytan
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/25860
• Last update: 10.03.2025, 11:44 AM CET