Max Planck Institute for Intellectual Property , Competition and Tax

We analyze the incidence and welfare effects of unit sales taxes in experimental monopoly and Bertrand markets. We find, in line with economic theory, that firms with no market power are able to shift a high share of a tax burden on to consumers, independent of whether buyers are automated or human players. In monopoly markets, a monopolist bears a large share of the burden of a tax increase. With human buyers, however, this share is smaller than with automated buyers as the presence of human buyers constrains the pricing behavior of a monopolist. * Financial support of LMUexcellent is gratefully acknowledged. For providing laboratory resources we kindly thank MELESSA of the University of Munich. The third author acknowledges financial help from the Netherlands Organisation for Scientific Research (NWO) through a VIDI grant.