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Tax incidence and price discrimination: An application of theories to gambling markets
Xinhua Gu; Pui Sun Tam
2014-03
Source PublicationChina Economic Review
ISSN1043-951X
Volume28Pages:135-151
Abstract

This paper examines whether a casino tax is good for local welfare in a tourism economy. We find that what is important for efficiency is not the tax rate itself but the tax incidence on tourists. Casino tourism in Macao engages in price discrimination via market segmentation. We prove that, compared with the mass market, the VIP market will grow faster with a greater price rise if a tax hike on the VIP market is not large, but will grow less rapidly with a smaller price increase if the tax hike is very large. An empirical study is carried out using data from Macao, which is typical of segmenting markets for discriminatory pricing. We show that our theory is largely consistent with observed evidence. This paper also provides some policy recommendations useful for Macao. We propose that its casino tax should be kept low at its current rate in the mass market but be raised substantially in the VIP market if its economic growth is to be made less unbalanced and more sustainable.

KeywordCasino Tourism Tax Incidence Market Segmentation Price Discrimination General Equilibrium
DOIhttps://doi.org/10.1016/j.chieco.2013.10.003
Indexed BySSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectEconomics
WOS IDWOS:000334144300010
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Cited Times [WOS]:4   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorXinhua Gu
AffiliationFaculty of Business Administration, University of Macau, Taipa, Macao, China
First Author AffilicationFaculty of Business Administration
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Xinhua Gu,Pui Sun Tam. Tax incidence and price discrimination: An application of theories to gambling markets[J]. China Economic Review,2014,28:135-151.
APA Xinhua Gu,&Pui Sun Tam.(2014).Tax incidence and price discrimination: An application of theories to gambling markets.China Economic Review,28,135-151.
MLA Xinhua Gu,et al."Tax incidence and price discrimination: An application of theories to gambling markets".China Economic Review 28(2014):135-151.
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