Resumen de Specific or ad valorem? A theory of casino taxation
This paper explores the effects of excise taxation in markets containing two consumer groups with distinct differences in demand elasticity. A model of second degree price discrimination is employed with an endogenously funded public good to represent a protected casino market with two distinct consumer groups, problem gamblers and recreational gamblers. The paper finds that, when quantity is used as the endogenous product variable, consumers tend to obtain a higher provision of the public good with specific taxes than with ad valorem taxes. The model also provides evidence that the casino gambling industry may not be a good candidate for a Pigovian tax due to the behaviour of a small group that produces negative externalities (problem gamblers) but that also tends to be more price-insensitive than the rest of the population.
