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...dustry and the 2003 tax change. Section IV outlines our conceptual framework and describes the data. Section V presents our empirical findings. Section VI offers concluding discussion. 3 II. Literature on Tax Pass-Through Gasoline Taxes Tax pass-through is the rate of price increase to consumers per unit of tax imposed. Under perfect competition, the pass-through has an upper bound of one and is determined by the relative elasticities of supply and demand. In models of less than perfect competition, passthrough rates also depend on the curvature of demand and degree of market competitiveness (Weyl and Fabinger, 2013). Four recent studies examine pass-through of state gasoline taxes. Using monthly, state level data for the 48 mainland states and the District of Columbia between 1989 and 1997, Chouinard and Perloff (2004) estimate a reduced form model with a variety of demand and cost shifters and with state and seasonal fixed effects. They find that consumers bear most of the taxes, but that consumer incidence is smaller in larger states. They attribute incidence differences to varying state-level supply elasticities. In their model, state-level supply elasticities, which reflect wholesalers’ abilities to ...

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...ency of the most common words in a larger text and the sizes of the largest cities in most countries. 7Similar observations in related contexts were made by Rutherford, Springer, and Yavas (2005) and Levitt and Syverson (2008). 8As we explain in detail in the main text, important concepts like the curvature of the direct demand function, the curvature of the indirect demand function, the pass-through rate, and the markup/quantity weighted average pass-through, which are due to the contributions by Bulow and Pfleiderer (1983), Aguirre, Cowan, and Vickers (2010), Bulow and Klemperer (2012), and Weyl and Fabinger (2013) cannot account for these effects. 1 INTRODUCTION 6 Our model makes a number of empirical predictions. We show that the underlying distributions in our model are non-parametrically identifiable and use the data set of Genesove and Mayer (2001) on the condominium market in Boston in the 1990s to estimate the distributions of the seller’s and buyers’ valuations (which can be interpreted as supply and demand functions). Assuming that the percentage fee was chosen to maximize a weighted average of the intermediary’s and the seller’s profit, we can back out which weight is consistent with the 6% fe...