Comparison between optimal output tax and ad valorem tax for a polluting oligopolist under demand uncertainty

This article examines the results of an optimal output tax and an optimal ad valorem tax for a polluting oligopolist under demand uncertainty and then compares them with conventional results under an assumption of certainty. We show that, for general representations of uncertainty, the optimal tax under uncertainty is less than that under certainty. Finally, we discuss some findings regarding tax rates and tax revenues and investigate the regulatory feasibility of implementing the optimal solutions. Copyright Springer Japan 2002