Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition
Year: 2013
Type: article
Abstract: We extend five principles of tax incidence under perfect competition to a general model of imperfect competition. The principles cover (1) the independence of physical and economic incidence, the (2) qualitative and (3) quantitative manner in which taxes are split between consumers and producers, (4) the determinants of tax pass-through, and (5) the integration of local incidence to determine the overall division of surplus. We show how these principles can be used to simplify and generalize the analysis of a range of economic questions such as the optimal procurement of new markets and the welfare effects of third-degree price discrimination.
Source: Journal of Political Economy
DOI: 10.1086/670401
Authors: E. Glen Weyl, Michal Fabinger
Institutions: University of Chicago, The University of Tokyo
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3121524546