Papers

The International Review of Accounting, Banking and Finance
April 2009 Volume 1 No. 2

A Note on the Lump Sum Tax of the Rate-of-Return Regulated Monopoly Model

Chin Wei Yang ¹ , Ken Hung ² , John A. Fox ³

1. Clarion University of Pennsylvania / National Chung Cheng University
2. Sanchez School of Business, Texas A&M International University
3. The Fox Consultant Incorporated, Klamath Falls,Oregon.

Abstract:
A Lump Sum Tax has very different effects when imposed upon a rate-of-return regulated monopolist, such as an electric utility compared to the more commonly analyzed unregulated monopolist. We find that contrary to the case of an unregulated monopolist a lump-sum tax does reduce output if capital is not an inferior input in the production process. Hence, it will raise the price. In this paper, we have formally developed three propositions regarding the impact of such a tax on labor, capital, and output.

JEL Classification:H21, L43, L51.

Keywords:Lump-Sum Tax; Regulated Monopoly

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