Hi, happy to find this page. We are actually working on this topic in a particolar feature. This does not deal with congestion or any physical externality but with tax externality.
main finding : an improvement of the quality of a good, can result in a welfare reduction.
Modelling context : discrete choice modelling, choice between two goods and a numeraire good. two goods have quality attributes. Goods have different tax rates. taxes are treated as transfered : they are distributed to households. we can add externality to the model, but that does not change the main conclusions.
Main mechanism : different goods with different tax rates. shifting demand from higly taxed good to low taxation goods result in a revenue reduction and welfare reduction. Looks so simple like that. It is like Braess but does not rely on a physical externality but rather on a fiscal externality : whoever chooses a less taxed mode, reduces tax revenues hence household welfare/revenue. This obviously treats taxes as a transfer : there is an individual benefit from paying less taxes (embedded in price) and a collective loss from collecting less.
We have two conference papers on this: Latest one is Journées de Micro Economie 2024.
Hi, happy to find this page. We are actually working on this topic in a particolar feature. This does not deal with congestion or any physical externality but with tax externality.
main finding : an improvement of the quality of a good, can result in a welfare reduction.
Modelling context : discrete choice modelling, choice between two goods and a numeraire good. two goods have quality attributes. Goods have different tax rates. taxes are treated as transfered : they are distributed to households. we can add externality to the model, but that does not change the main conclusions.
Main mechanism : different goods with different tax rates. shifting demand from higly taxed good to low taxation goods result in a revenue reduction and welfare reduction. Looks so simple like that. It is like Braess but does not rely on a physical externality but rather on a fiscal externality : whoever chooses a less taxed mode, reduces tax revenues hence household welfare/revenue. This obviously treats taxes as a transfer : there is an individual benefit from paying less taxes (embedded in price) and a collective loss from collecting less.
We have two conference papers on this: Latest one is Journées de Micro Economie 2024.