Do consumers buy less of a taxed good?

Abstract

This paper shows that consumers may buy more of a taxed good if it is sold by a two-sided platform firm. Two-sided platform industries serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry (newspapers/magazines and advertisers), banking (cardholder and merchant), and the software industry (users and application developers). The paper compares ad valorem and specific taxes and shows that they may have opposite effects on quantities sold, and that the ad valorem tax - the most commonly used tax throughout the OECD - has effects on prices and quantities not previously recognized.