Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/267240 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 10007
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyze the effects of commodity taxation in markets where suppliers implement second-degree price discrimination schemes, such as offering different package sizes and quality-differentiated versions of the same product. In these markets, suppliers distort the quantity (or quality) intended for all types of consumers, except for those with the highest marginal willingness to pay. We show that differentiated ad valorem taxes can alleviate this distortion, and thus increase government revenue as well as welfare, provided the tax rate increases with the size (or quality) of the good supplied.
Subjects: 
commodity taxation
tax incidence
price discrimination
JEL: 
D40
H21
H22
L10
Document Type: 
Working Paper
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