Signaling and indirect taxation
![Printer-friendly version Printer-friendly version](http://coalitiontheory.net/sites/all/modules/print/icons/print_icon.png)
Article
Journal of Public Economics
Issue number:
3-4
Publisher:
Elsevier
Year:
2012
Journal pages:
331–340
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.