Title
Quality-based price discrimination and tax incidence: evidence from gasoline and diesel cars Quality-based price discrimination and tax incidence: evidence from gasoline and diesel cars
Author
Faculty/Department
Faculty of Applied Economics
Publication type
report
Publication
Antwerp , [*]
Source (series)
Research paper / UFSIA, Faculty of Applied Economics , 1999:003
Volume/pages
27 p.,
Carrier
E
Target language
English (eng)
Affiliation
University of Antwerp
Abstract
The existing tax policies towards gasoline and diesel cars in European countries provide a unique opportunity to analyze quality-based price discrimination and the implied tax incidence. We develop an econometric framework for the demand and pricing of gasoline and diesel cars. Consumers choose the type of engine based on their annual mileage; prices are set by the manufacturers. Our empirical results show that the relative pricing of gasoline and diesel cars is consistent with price discrimination of a monopolistic type, e®ectively segmenting low mileage from high mileage consumers. On average, about 75 to 90 percent of the price di®erentials between gasoline and diesel cars can be explained by markup di®erences. The implied tax incidence is especially based on fuel taxes and less so on annual car taxes. Implications for the e®ectiveness and the revenue e®ects of tax policy are drawn.
Full text (open access)
https://repository.uantwerpen.be/docman/irua/be1217/eb1d5917.pdf
Handle