hide
Free keywords:
Tax incidence, monopoly, Bertrand competition, experiment
Abstract:
We analyze the incidence and welfare effects of unit sales taxes in experimental
monopoly and Bertrand markets. We find, in line with economic theory, that
firms with no market power are able to shift a high share of a tax burden on to
consumers, independent of whether buyers are automated or human players. In
monopoly markets, a monopolist bears a large share of the burden of a tax
increase. With human buyers, however, this share is smaller than with
automated buyers as the presence of human buyers constrains the pricing
behavior of a monopolist.
