Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 16

In an attempt to increase tax revenues, legislators in several states have introduced legislation that would increase state excise taxes. Examine the impact of such an increase on the equilibrium prices paid and quantities consumed by consumers in markets characterized by (1) Sweezy oligopoly, (b) Cournot oligopoly, and (c) Bertrand oligopoly, and determine which of these market settings is likely to generate the greatest increase in tax revenues.