Ruhr Economic Papers

Ruhr Economic Papers #19

Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination

by Jörg Plewka

Ruhr-Universität Bochum und TU Dortmund, 07/2007, 16 S./p., 8 Euro, ISBN 978-3-86788-013-8



In this paper it is analysed, how, under price discrimination, the tax burden is shared between the distinct consumer groups. Unit and ad valorem taxes are compared, revealing an impossibility of fiscal discrimination with regard to price changes. Contrary to conventional tax incidence analysis, it is shown that quantities traded do matter. Relative market shares are decisive for the distribution of tax burdens thereby opening up an opportunity for fiscal discrimination in choosing tax types. This discriminatory potential is limited and not caused by price discrimination per se but rather due to monopolistic supply.

JEL-Classification: H22, L11

Keywords: Tax incidence; unit tax; ad valorem tax; price discrimination