Highlights Transport firms’ tax pass-on rates to users under Cournot, Bertrand and Collusion. More intense competition between the firms results in higher pass-on rates. The higher the weight the firms place on users’ welfare the higher the pass-on rates. Cournot yields the lowest pass-on rates when the firms produce complements. Collusion yields the lowest pass-on rates when the firms produce substitutes and maximise profits.
Abstract The paper first briefly reviews the extent to which profit maximising transport firms with identical cost functions and producing identical transport services pass-on output taxes to transport users under perfect competition, under different forms of imperfect competition and when they act as monopolists. Then the analysis is extended to derive the pass-on rates and activity reductions caused by an output tax when firms care both about profit and consumer surplus, produce symmetrically differentiated services and compete simultaneously in quantities and fare and when they collude. The pass-on rates and activity reductions are highest under collusion and lowest under Cournot competition when they produce complementary services. When they produce substitute services, the result is ambiguous and the competitive situation that yields highest pass-on depends on the firms’ objective functions and how fiercely they compete. Two important counterintuitive results are that the more intensely the firms compete and the more weight they put on consumer surplus, the higher the pass-on rates are.
Charges on transport – To what extent are they passed on to users?
Transportation Research Part A: Policy and Practice ; 69 ; 183-195
2014-08-12
13 pages
Article (Journal)
Electronic Resource
English
Charges on transport – To what extent are they passed on to users?
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