Template-Type: ReDIF-Paper 1.0
Title: Optimal Internality Taxation of Product Attributes
Author-Name: Andreas Gerster
Author-Email: gerster@uni-mannheim.de
Author-Name: Michael Kramm
Author-Email: kramm@wiso.uni-koeln.de
Classification-JEL: H21, D82, D04, Q58
Keywords: Optimal commodity taxation, non-linear taxation, internalities, behavioral economics, public economics, environmental economics

Abstract: This paper explores how a benevolent policy maker should optimally tax
(or subsidize) product attributes when consumers are behaviorally biased. We
demonstrate that market choices are informative about biases, which can be exploited for targeting biased consumers via a non-linear tax schedule. We show
that its properties depend on few parameters of the joint distribution of consumer
valuations and biases. Furthermore, we provide a novel justification for behaviorally motivated product standards and derive when a combination of taxes and
standards is optimal. We illustrate our findings based on a numerical example
from the lightbulb market.

Note: 
Length: 60
Creation-Date: 2024-02
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp510
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_510