Tax incentives speed up trade in durable goods monopoly markets.
Taxation can influence how monopolies in markets for durable goods operate. By adjusting tax rates based on trade volume, regulators can encourage monopolists to trade more quickly. If monopolists face losses with standard pricing, they may delay trades strategically. The impact of tax policies depends on whether the monopolist can commit to a certain strategy. In cases with different types of consumers, a tax policy involving a "back-loaded subsidy" can lead to better outcomes with commitment. Without commitment, a "front-loaded subsidy" can improve overall welfare.