A Note on Ad Valorem and Per Unit Taxation in an Oligopoly Model

This note shows that per unit taxation welfare dominates ad valorem taxation in an oligopoly model, when the number of consumers is sufficiently high compared to the number of oligopolists. It aims to provide an alternative perspective to existing literature arguing instead the dominance of ad valorem over per unit taxation in oligopoly frameworks. Our result is obtained in a simple example which uses a strategic market game formulation to study strategic behavior at a general equilibrium level. JEL Classification: H22, L13, C72, D51.