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Taxation in Two-Sided Markets

Kind, Hans Jarle; Koethenbuerger, Marko; Schjelderup, Guttorm
Working paper
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URI
http://hdl.handle.net/11250/163899
Date
2007-01
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  • Discussion papers (FOR) [509]
Abstract
Two-sided platform firms serve distinct customer groups that are connected through interdependent demand, and include major businesses such as the media industry, banking, and the software industry. A well known textbook result in one-sided markets is that a government may increase a monopolist’s output and reduce the deadweight loss by subsidizing output. The present paper shows that this result need not hold in a two-sided market. On the contrary, a higher advalorem tax rate - rather than a subsidy - could increase output and enhance welfare.
Publisher
Norwegian School of Economics and Business Administration. Department of Finance and Management Science
Series
Discussion paper
2007:3

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