Edgeworth's Taxation Paradox and the Nature of Demand and Supply Functions

  title={Edgeworth's Taxation Paradox and the Nature of Demand and Supply Functions},
  author={Harold Hotelling},
  journal={Journal of Political Economy},
  pages={577 - 616}
  • H. Hotelling
  • Published 1 October 1932
  • Economics
  • Journal of Political Economy
That a tax imposed on the seller of a monopolized article may lead to an actual lowering of the price to the buyer has been shown by F. Y. Edgeworth.2 His example was of a railway supplying two classes of passenger service at different prices and, unhindered by governmental interference, setting its rates so as to make its own profit a maximum. When the company is compelled to pay a tax on each first-class ticket, it finds it profitable, in Edgeworth’s example, to reduce rates on both classes… 

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