Signaling and indirect taxation

Truyts, Tom

doi:10.1016/j.jpubeco.2011.11.004

Signaling and indirect taxation

Truyts, Tom

(2012) Journal of Public Economics — Vol. 96, n° 3-4, p. 331-340 (2012)

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Authors

Truyts, TomUSL-B
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Abstract

Commodities communicate. We investigate optimal indirect taxation when both the intrinsic qualities of goods and signaling motivate consumption choices. Optimal indirect taxes are introduced into a monotonic signaling game. We provide sufficient conditions for the uniqueness of the D1 sequential equilibrium strategies. In the case of pure costly signaling, signaling goods can in equilibrium be taxed without burden. When commodities serve both intrinsic consumption and signaling, optimal taxes are characterized by a Ramsey rule, which deals with distortions resulting from signaling.

Affiliations

UCLouvainSSH/LIDAM/CORE - Center for operations research and econometrics
Katholieke Universiteit LeuvenCenter for Economic Studies

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Truyts, T. (2012). Signaling and indirect taxation. Journal of Public Economics, 96(3-4), 331-340. https://doi.org/10.1016/j.jpubeco.2011.11.004 (Original work published 2012)