Discrete Prices and the Incidence and Efficiency of Excise Taxes

• 成果类型: Article
• 署名作者: Conlon, Christopher T.; Rao, Nirupama L.
• 署名单位: New York University; University of Michigan System; University of Michigan
• 刊物名称: AMERICAN ECONOMIC JOURNAL-ECONOMIC POLICY
• ISSN/ISSBN: 1945-7731
• DOI: 10.1257/pol.20160391
• 发表日期: 2020
• 页码: 111-143
• 关键词: cigarette taxes; taxation; oligopoly; COSTS

摘要

This paper uses-UPC-level data to examine the relationship between excise taxes, retail prices, and consumer welfare in the distilled spirits market. We document a nominal rigidity in retail prices that arises because firms largely choose prices that end in 99 cents and change prices in whole-dollar increments. A correctly specified model, like an ordered logit, takes this discreteness into account when predicting the effects of alternative taxes. Explicitly accounting for price points substantially impacts estimates of tax incidence and the excess burden cost of tax revenue. Meaningful nonmonotonicities in these quantities expand the potential considerations in setting excise taxes.