evaluating decision strategies for equity of public risks many important decisions include the loss of life among their possible consequences alternative actions have different implications for the number of possible fatalities the equity of those eventual fatalities and the equity of the process resulting in those fatalities this paper defines a concept of ex ante risk equity to address the equity of the process and distinguishes this concept from the ex post risk equity of the fatalities the paper indicates that an analysis of decision strategies addresses ex ante equity in this context both types of equity as well as loss of life are included in a von neumann morgenstern utility model developed to evaluate public risks this approach provides a method to investigate the implications of different value judgments in examining alternatives and illustrates an appropriate use of von neumann morgenstern utility for problems involving social consequences such as public risks

fairness self interest and the politics of the progressive income tax all advanced democracies have adopted income taxes with considerable progression in marginal tax rates to explain this we examine the nature of individual and collective preferences over alternative tax schedules in the context of a simple two sector model we first consider the case of altruistic or sociotropic citizens who view the income tax as a means of achieving a fairer or more egalitarian distribution of income we show that greater marginal rate progressivity may well be less fair that a fairest tax however defined is always a linear or flat rate schedule in which all incomes are taxed at the same marginal rate and that with a purely sociotropic electorate there exists a flat rate schedule which is a majority equilibrium we then show that with self interested voters who seek to minimize their own tax burdens greater marginal rate progression may well be preferred by middle and upper income voters that for middle income citizens the optimal schedule is a sharply progressive one and that within the set of individually optimal schedules there exists a majority equilibrium which is a progressive schedule which minimizes the burden on median income or middle class citizens at the expense of lower and upper income taxpayers

the political economy of publicly provided private goods abstract this paper integrates two different approaches to the analysis of public provision of private goods education health care day care etc while normative public economics has established an efficiency case for such provision the commonly held political economy view has been that it is an economically inefficient phenomenon generated by the political process we establish a political economy framework which in general yields an efficient choice of distributional policy it follows that the central mechanism studied in the normative theory is equally relevant to voting models of decisions on public provision it is shown that under plausible information constraints economically efficient public provision of private goods will be part of politically rational decisions the result is established both within a median voter process and a representative democracy of political parties

on the industrial ecology potential in asian developing countries abstract this paper focuses on the current situation in the adaptation and adoption of industrial ecology in asian developing countries adcs the objective of this paper is to consider the possibilities to develop an eco industrial development eid strategy for these developing countries we review the regional indigenous resources of adcs and use the strengths weaknesses opportunities and threats swot grouping to classify the preconditions of industrial ecology in adcs the authors of this paper argue that unlike the usual way of applying industrial ecology as a technical tool or a practical instrument adcs need to adopt industrial ecology as a strategic vision and as a strategic approach to plan the economic social and ecological development of their national economies in this way it can be possible for the adcs to avoid the same problems that occurred when the developed countries experienced industrialization and rapid economic growth and move toward more sustainable development

qalys and hyes under what conditions are they equivalent the paper examines what restrictions have to be imposed on the individual s preference structure for qalys and hyes to yield identical results it is shown that using qalys involves imposing three additional restrictions empirical evidence suggests that these restrictions cannot be expected to hold in all applications the main problem in using hyes appears to be practical an alternative index is proposed that may help to bridge the gap between qalys and hyes by combining to some extent the advantages of the two measures

ex ante equity in public risk in evaluating decision alternatives that involve risk of death among members of the public there are two types of equity that must be considered namely ex ante and ex post equity among the two ex ante equity is more controversial this paper suggests refinements to recent definitions of ex ante equity based on distribution of individuals risks across equally desirable outcomes and historical inequity

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

income maintenance and labor force participation the paper studies the optimal tax subsidy schedules in an economy where the only decision of the agents is to work or not with an application to the case of france given an income guarantee provided by the welfare state the tax schedule that maximizes government revenue provides a benchmark the laffer bound above which it is inefficient to tax in fact under mild conditions a feasible allocation is second best optimal if and only if the associated taxes are lower than the laffer bound the only restriction that efficiency puts on the shape of the tax scheme is this upper laffer bound the laffer tax scheme itself can be computed from the joint distribution of the agents productivities and work opportunity costs depending on the economy it can take widely different forms and exhibit for instance negative marginal tax rates after estimating the joint distribution of productivities and work opportunity costs on french data i compute the laffer bound for two subpopulations single women and married women with two children or more quite surprisingly the actual incentives to work appear to be very close to the bound

monopoly provision of product quality and warranties an exploration in the theory of multi dimensional screening we address the monopoly problem of designing and pricing a product line of goods distinguished by different quality and warranty levels consumers vary in their evaluations of these attributes so that the problem is one of screening it is sufficiently complex that the local approach commonly used does not work instead we use new techniques for dealing with incentive constraints between nonadjacent consumer types these techniques allow us to characterize optimal allocations that may not be monotonic in particular although the more eager types of buyer do pay higher prices and yield the monopoly higher profit they may receive lower quality or lower warranty coverage we find preference restrictions that restore monotonicity concave risk tolerance implies that warranty coverage increases in type and constant absolute risk aversion implies that quality increases in type

on the optimality of optimal income taxation abstract the mirrleesian model of income taxation restricts attention to simple allocation mechanism with no strategic interdependence i e the optimal labor supply of any one individual does not depend on the labor supply of others it has been argued by piketty 2009 12 that this restriction is substantial because more sophisticated mechanisms can reach first best allocations that are out of reach with simple mechanisms in this paper we assess the validity of piketty s critique in an independent private values model as a main result we show that the optimal sophisticated mechanism is a simple mechanism or equivalently a mirrleesian income tax system

optimal incentives for labor force participation abstract optimal taxation is analyzed under a rawlsian criterion in an economy where the only decision of the agents is to participate or not to the labor force the model allows for heterogeneity both in the agent s productivities and aversions to work at a first best optimal schedule the marginal agent who decides to work pockets all of her productivity while being just compensated for her work aversion when the planner does not observe work aversion financial compensation for work is lower than productivity theory puts little restrictions on the shape of the optimal tax schedules the usual first order conditions involving the elasticities of participation only apply for sufficiently regular economies we qualitatively show how the optimal incentive schemes depend on the underlying structure of the preferences 100 marginal tax rates or subsidies to work are related to specific features of the economies

equity axioms for public risks from the perspective of a two person society we explain and analyze six axioms for equity among individuals who are exposed to the possibility of death from a public hazard the axioms are concerned with how a given total risk expected fatalities is distributed over the four possible life death consequences for the two people maximal subsets of mutually compatible equity axioms are identified first for a monotonic ordinal utility function and then for a more restrictive von neumann morgenstern utility function

viewpoint innovations in the theory and practice of redistribution policy we present a survey of key results from second best optimal redistribution theory and their implications for tax transfer policy the core results include the corlett hague theorem the deaton conditions the production efficiency theorem the atkinson stiglitz theorem and the mirrlees saez characterization of the optimal non linear income tax system these have been augmented in recent years by optimal participation tax rates the implications of involuntary unemployment the use of unconventional instruments such as minimum wages in kind transfer and workfare and the optimal taxation of capital income and bequests l auteur presente un survol des principaux resultats theoriques de la redistribution optimale de second ordre et de leurs implications pour les politiques d imposition et de transferts les resultats fondamentaux incluent le theoreme de corlett hague les conditions de deaton les theoremes d efficacite en production le theoreme d atkinson stiglitz ainsi que la caracterisation du systeme optimal d imposition non lineaire du revenu a la mirrlees saez ces derniers resultats ont ete enrichis au cours des dernieres annees par certains autres portant sur les taux d imposition decoulant des allocations conditionnelles les implications du chomage involontaire l usage d instruments non conventionnels tels que le salaire minimum les transferts en nature le workfare ainsi que l imposition optimale des revenus du capital et des legs ces resultats sont exposes et leurs implications pour les politiques d imposition et de transferts sont discutees

majority voting with single crossing preferences we clarify and extend a number of sufficient conditions for the existence of a majority voting equilibrium on one dimensional choice domains these conditions variously stated in the previous literature all impose order restrictions on voter preferences for instance monotone marginal rates of substitution which we show to imply or be equivalent to a general ordinal version of the single crossing condition this simple property is economically intuitive and easily checked in applications this ease of application is demonstrated through an examination of voting models of redistributive income taxation and trade union bargaining behaviour

optimal nonlinear income taxation with learning by doing abstract this paper examines a two period model of optimal nonlinear income taxation with learning by doing in which second period wages are an increasing function of first period labour supply we consider the cases when the government can and cannot commit to its second period tax policy in both cases the canonical mirrlees stiglitz results regarding optimal marginal tax rates generally no longer apply in particular if the government cannot commit and each consumer s skill type is revealed it is optimal to distort the high skill type s labour supply downwards through a positive marginal tax rate to relax an incentive compatibility constraint our analysis therefore identifies a setting in which a positive marginal tax rate on the highest skill individual can be justified despite its depressing effect on both labour supply and wages

relativity mobility and optimal nonlinear income taxation in an open economy abstract recent evidence suggests that globalization has reduced the barriers to international labor mobility and induced more cross country social comparisons in an open economy with tax driven migration and consumption externalities relativity we derive an optimal tax formula that subsumes existing ones obtained under a maximin social objective and additively separable utility and sign the second best mirrleesian marginal tax rates for all skill levels we establish the thresholds of the elasticity and level of migration to determine when relativity and inequality act as complements or substitutes in shaping the optimal top tax rate under both nash and stackelberg tax competition if the migration probability of top income workers is approximately 50 numerical calculation using parameter estimates from empirical studies shows that the country with labor inflow outflow implements over 10 lower higher marginal tax rates than suggested by the autarky equilibrium of kanbur and tuomala 2013

health utility indices and equity considerations the aim of this paper is to propose methods that incorporate equity concerns into cost utility analysis the focus of the paper is on qalys but the results apply to health utility indices in general two interpretations of qalys are considered qalys as von neumann morgenstern utilities and qalys as measures of health a justification is provided for aggregating consistently scaled qalys as utilities over individuals the conditions underlying unweighted aggregation of qalys are identified these conditions exclude two common types of equity concern algorithms are proposed that take into account equity concerns and that are relatively easy to apply

optimal marginal and average income taxation under maxi min using the mirrlees optimal income tax model with a maxi min social welfare function we derive conditions for a decreasing marginal tax rate throughout the skill distribution a strictly concave tax function in income and a single peaked average tax schedule with additive preferences and a constant labor supply elasticity marginal tax rates are decreasing below the modal skill level and will also decrease above the mode if aggregate skills are non decreasing with the skill level in this case and with a bounded skill distribution or with a constant hazard rate the tax function is strictly concave in income and the average tax rate single peaked when quasilinear utility functions apply in either consumption or leisure under fairly mild restrictions on the truncated or untruncated distribution function marginal tax rates are decreasing in skill and the average tax profile is single peaked the distribution of skills has the same quantitative influence for either case of quasilinearity these results continue to hold when there is bunching at the bottom due to a binding non negativity constraint we also illustrate how relaxing the assumption of constant elasticity of labor supply generally used in the literature modifies the results

optimal income taxation an example with a u shaped pattern of optimal marginal tax rates comment using the mirrlees optimal income tax model with quasi linear preferences the paper examines conditions for marginal tax rates to be rising at high income levels and declining in an interval containing the modal skill it examines conditions for the marginal tax rate to be higher at a low skill level than at the high skill level with the same density an argument only holding for skill levels above a cutoff where resources of a worker are marginally of the same value as resources of the government data on earnings rates are presented copyright 1998 by american economic association

a reduced form optimal nonlinear income tax problem abstract for a finite population with quasilinear preferences it is shown how mirrlees optimal nonlinear income tax problem can be simplified to a reduced form problem involving only the allocation of the consumption good this result is a finite version of a proposition established in the continuum by s lollivier and j c rochet

cost effectiveness utility analyses do current decision rules lead us to where we want to be despite the growing literature on economic evaluation of health care programmes little attention has been paid to the theoretical foundations of cost effectiveness and cost utility analyses and the validity of the decision rules adopted as methods of achieving the stated goals we show that although applications of the techniques can be used to pursue some managerial objectives in the context of highly constrained environments such applications are inconsistent with both welfare economic objectives and the interpretations of the findings of these applications alternative strategies are identified as potential and practical methods for pursuing welfare economic objectives

a general characterization of optimal income tax enforcement this paper develops a general approach to characterizing optimal income tax and enforcement schemes our analysis clarifies the nature of the interplay between tax rates audit probabilities and penalties for misreporting in particular it is shown that for a variety of objective functions for the principal the optimal tax schedule is in general concave at least weakly and monotonic the marginal tax rates determine the audit probabilities and less harsh penalties lead to higher enforcement costs our results imply that there exists a tradeoff between equity and efficiency considerations in the enforcement context which is similar to that in the moral hazard context for tax policy it is well accepted by now that informational asymmetries generate important constraints on the formulation of economic policy an early and classic example is given by mirrlees 1971 who considers the problem of optimal income taxation when individuals differ in their ability to transform effort into income it is assumed that ability and effort of an individual cannot be observed at any cost whereas income which is the product of these two unobservables is perfectly and costlessly observable taxes can thus depend only on final income under these informational conditions the equity efficiency tradeoffs that constrain the choice of tax policy arise only because of the presence of moral hazard associated with taxation of income if there were no moral hazard i e individual efforts and therefore incomes were exogenous the problem of optimal income taxation would be a trivial one since by assumption individual incomes are perfectly and costlessly observable in much of the recent literature on optimal income taxation in the presence of costly enforcement reinganum and wilde 1985 border and sobel 1987 and others on the other hand individual incomes are treated as exogenous i e there is no moral hazard however informational constraints arise from another important consideration namely an individual s income cannot be directly observed it can only be verified through a costly

technical note measuring equity in public risk an equitable distribution of risk is often an important criterion in the evaluation of technological and environmental risks in this paper we define the concept of equity precisely and develop measures for ex post and ex ante equity we then show how these measures combined with information on the number of possible fatalities can be used to rank alternatives that involve risks to human life

equity considerations in utility based measures of health outcomes in economic appraisals an adjustment algorithm in this paper we consider whether methods currently used to measure utility of health outcomes are consistent with the equity criteria adopted by researchers we show that unless the chosen equity criterion is incorporated in the design of the measurement instrument the derived health state utilities are inconsistent with the equity criterion except under special circumstances adjustment algorithms are derived based on the axioms of von neumann morgenstern utility theory which take account of difference equity criteria currently adopted in the literature the proposed approach is based on simple lottery questions of the type already used widely in empirical studies

nonlinear capital taxation without commitment we study efficient nonlinear taxation of labor and capital in a dynamic mirrleesian model incorporating political economy constraints policies are chosen sequentially over time without commitment our main result is that the marginal tax on capital income is progressive in the sense that richer agents face higher marginal tax rates

optimal income taxation with endogenous participation and search unemployment we characterize optimal redistributive taxation when individuals are heterogeneous in their skills and their values of non market activities search matching frictions on the labor markets create unemployment wages labor demand and participation are endogenous average tax rates are increasing at the optimum this shifts wages below their laissez faire value and distorts labor demand upwards the marginal tax rate is positive at the top of the skill distribution even when the latter is bounded these results are analytically shown under a maximin objective when the elasticity of participation is decreasing in the skill level and are numerically confirmed under a more general objective under the maximin above approximately 20 000 per year our model recommends higher marginal tax rates than a comparable competitive setting

optimal income tax under the threat of migration by top income earners we examine how allowing individuals to emigrate to pay lower taxes changes the optimal nonlinear income tax scheme in a mirrleesian economy an individual emigrates if his domestic utility is less than his utility abroad net of migration costs utilities and costs both depending on productivity a simple formula that complements saez s formula obtained in closed economy is derived for the marginal tax rates faced by top income earners it depends on the labour elasticity the tax rate abroad and the migration costs expressed as a fraction of the utility obtained abroad the rawlsian marginal tax rates obtained for the whole population illustrate a curse of the middle skilled simulations are provided for the french economy

voting over selfishly optimal nonlinear income tax schedules abstract majority voting over selfishly optimal nonlinear income tax schedules proposed by a continuum of individuals who have quasilinear in consumption preferences is considered roell 2012 has shown that individual preferences over these schedules are single peaked in this article a complete characterization of selfishly optimal schedules is provided each selfishly optimal schedule has a bunching region in a neighborhood of the proposer s skill type coincides with the maxi max schedule below this region and coincides with the maxi min schedule above it using techniques introduced by vincent and mason 1967 the bunching region is identified by solving an unconstrained optimization problem information about the optimal schedules is used to provide a relatively simple proof of single peakedness the condorcet winning tax schedule features marginal tax rates that are negative resp positive on the maxi max resp maxi min part of the schedule except at the endpoints of the skill distribution where they are zero

the politics of progressive income taxation with incentive effects this paper studies majority voting over quadratic taxation and investigates under which conditions marginal progressivity emerges as a voting outcome in our model with endogenous income there is no majority condorcet winning tax schedule we then investigate less demanding political equilibrium concepts in order to see under which conditions the set of equilibria is composed only of progressive tax functions we follow three strategies i reduction of the policy space to the tax functions that are ideal for some voter ii elimination of weakly dominated strategies and the use of mixed strategies in a standard downsian two party competition game iii assumption that political parties interact repeatedly and care about the size of their majority although each approach captures a different aspect of political behavior they point to the same simulation based conclusion that progressivity is more likely to emerge for most distributions of abilities and that it is actually the only possible voting outcome if the distribution is sufficiently concentrated at the middle

a reexamination of the optimal nonlinear income tax abstract this paper investigates mirrlees model of optimal income taxation it provides a concrete example of utility and density functions for which the solution to the usual first order model is not implementable i e and example where the first order approach does not work adding second order conditions leads to an extended model and to implementable solutions if these conditions are binding one gets a kink in the optimal net income schedule and bunching of individuals occurs the properties of an optimal nonlinear income tax are reexamined within the extended model

promoting energy efficiency financing and escos in developing countries mechanisms and barriers abstract developing countries have tremendous potential to increase energy efficiency but face several barriers before the potential can be realised a lack of access to appropriate financing mechanisms is one of the important barriers energy service companies escos a market oriented mechanism to improve energy efficiency had successful experiences in developed countries such as the usa and canada and developing countries such as south korea escos are in nascent stage in many developing countries and face several barriers that include market finance and institutional barriers poor energy pricing policies high transaction costs etc market development through active involvement of governments as a customer information provider and policy maker is required to promote escos development of specialised energy efficiency financing windows in appropriate financial institutions development of skills for energy efficiency project appraisal and design of specialised financial products are other measures to accelerate the diffusion of energy efficiency

equity considerations in public risks evaluation recent contributions by r k sarin and r l keeney and r l winkler approach the problem of public risks evaluation from a multiattribute perspective in which fatalities ex ante equity and ex post equity play leading roles the present paper considers the same problem from the perspective of holistic comparisons between potential fatality distributions we consider a number of axioms for such comparisons identify maximally compatible sets of axioms and relate our approach to the multiattribute approach we also identify a form of dispersive equity that is not discussed in recent work but deserves further consideration

a complete solution to a class of principal agent problems with an application to the control of a self managed firm this paper considers a class of principal agent problems which have the following features 1 there is adverse selection because the principal ignores the value of one parameter of the agent s true characteristics 2 leaving aside the information parameter the principal s welfare as well as the agent s welfare depend on two types of variables observable to both of them the first ones possibly multidimensional are called action variable s and the second one which is one dimensional has in general the meaning of a money transfer 3 the principal is a stackelberg leader of the two person game he can commit himself to decision rules which are admissible on informational grounds he optimizes within the adequate class taking into account besides the agent s reaction one constraint which has generally the meaning of an individual rationality constraint and sometimes of a feasibility constraint the optimization is limited to the class of non stochastic mechanisms 4 the problem can also receive an alternative interpretation the principal faces a continuum of agents of unknown characteristics the distribution being known however stylized principal agent problems of this type have often been considered in the economic literature in particular the reader will later be able to recognize that the standard income tax model a la mirrlees 1971 the quality or quantity choice model of the monopolist a la mussa and rosen 1978 or maskin and riley 1982 and the model of government regulation of the private monopolist of baron and myerson 1982 all belong to

introduction to the special issue on advances in life cycle approachesto business and resource management in the asia pacific region abstract this special issue of the journal of cleaner production was initiated as a result of the 5th and 6th meetings of the asia pacific roundtable for sustainable consumption and production aprscp which were held in melbourne australia and hanoi vietnam respectively a need identified at those meetings was to create another means of communicating the best ideas and papers being presented to a wider audience the asia pacific region has special development needs given its rapid emergence as a global production hub but coupled to that are also the rapid social adjustments and shifts in patterns of consumption and production which aren t positive for the environment this special issue contains eight papers covering the implementation of cleaner production and life cycle principles at the systems and regional planning level these articles cover urban development corporate cp programs supply chain management eco industrial networks and industrial parks recycling and understanding the role of human factors in bringing about environmental change

the role of ex ante and ex post decisions in the valuation of life abstract this paper examines the use of ex ante and ex post criteria in the evaluation of projects involving the risk of death one issue concerns the appropriate welfare function and it is argued that this should reflect both ex post and ex ante considerations but not in the form of restrictions on the welfare function the second issue concerns the form of compensation the argument in favour of ex post compensation as a means of reducing the cost of risk bearing needs to be modified when risks involve more than a single dimension as they do in projects involving the risk of death

inherent inequality and the optimal graduation of marginal tax rates in most countries marginal tax rates increase with income this is at variance with the results of the optimal income taxation literature whose numerical calculations have established the presumption that optimal marginal tax rates should decline with income have the existing results of optimal income tax literature therefore established a presumption that the observed pattern is suboptimal the object of this paper is to attempt to answer this question the numerical calculations that followed mirrlees s 1971 pioneering contribution tried many variations on his basic parametrisation including different preference structures and different functional forms however so far as we are aware most of the reported results maintain his basic assumption of a log normal distribution of abilities or wages with a standard deviation of logs of 0 39 mirrlees 1971 himself appealed the work of lydall 1969 for this figure but it has become the industry standard we show in this paper that departures from this assumption in particular increases in inherent inequality can alter the qualitative pattern of optimal marginal tax rates dramatically contrary to the currently available calculations we show that the optimal graduation can indeed be such that marginal tax rates increase for the majority of the population which is consistent with the observed pattern but that there continues to exist a significant income range at the top where marginal tax rates decline which of course is counter to the observed pattern

measurement of health state utilities for economic appraisal health status measurement for use in economic appraisal of health care programmes is reviewed in this paper with particular emphasis on utility measurement a framework for economic appraisal is presented displaying the various components that must be measured and showing how the three forms of analysis cost effectiveness analysis cost benefit analysis and cost utility analysis relate to the framework and to each other one of the components in the framework is health status it can be measured using ad hoc numeric scales willingness to pay receive or health state utilities the determination of health state utilities is reviewed covering the following issues alternative sources of utilities health state descriptions multi attribute utility approach determination of appropriate subjects utility aggregation and accuracy three measurement techniques for health state utilities are described in detail rating scale standard gamble and time trade off the use of these methods is described for both chronic and temporary health states and for both health states considered better than death and those considered worse than death

political competition and mirrleesian income taxation a first pass we study downsian competition in a mirrleesian model of income taxation the competing politicians may dier in competence if politicians engage in vote share maximization the less competent politician s policy proposals are attractive to the minority of rich agents whereas those of the competent politician are attractive to the majority of poor agents the less competent politician wins with positive probability which gives rise to a political failure in the sense of besley and coate 1998 political failures are avoided if politicians maximize winning probabilities nevertheless the two equilibria cannot be pareto ranked the minority may be better o under vote share maximization

regulating a monopolist with unknown costs we consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator the regulator s objective is to maximize a linear social welfare function of the consumers surplus and the firm s profit in the optimal regulatory policy prices and subsidies are designed as functions of the firm s cost report so that expected social welfare is maximized subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs we explicitly derive the optimal policy and analyze its properties in their classic papers dupuit 2 and hotelling 5 considered pricing policies for a bridge that had a fixed cost of construction and zero marginal cost they demonstrated that the pricing policy that maximizes consumer well being is to set price equal to marginal cost and to provide a subsidy to the supplier equal to the fixed cost so that a firm would be willing to provide the bridge this first best solution is based on a number of informational assumptions first the demand function is assumed to be known to both the regulator and to the firm while the assumption of complete information may be too strong the assumption that information about demand is as available to the regulator as it is to the firm does not seem unnatural a second informational assumption is that the regulator has complete information about the cost of the firm or at least has the same information about cost as does the firm this assumption is unlikely to be met in reality since the firm would be expected to have better information about costs than would the regulator as weitzman has stated an essential feature of the regulatory environment i am trying to describe is uncertainty about the exact specification of each firm s cost function in most cases even the managers and engineers most closely associated with production will be unable to precisely specify beforehand the cheapest way to generate various hypothetical output levels because they are yet removed from the production process the regulators are likely to be vaguer still about a firm s cost function 12 p 684 as this observation suggests it is natural to expect that a firm would have better information regarding its costs than would a regulator the purpose of this paper is to develop an optimal regulatory policy for the case in which the regulator does not know the costs of the firm one strategy that a regulator could use in the absence of full information about costs is to give the firm the title to the total social surplus and to delegate the pricing decision to the firm in pursuing its own interests which would then be to maximize the total social surplus the firm would adopt the same marginal cost pricing strategy that the regulator would have imposed if the regulator had

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers

the cross price effect on willingness to pay estimates in open ended contingent valuation abstract previous literature has shown that potential buyers use a reference price or product to form their opinion about the value of a new product therefore the pricing decision is an interactive process we investigate the two generalizations of the cross price effect the neighborhood price effect and the asymmetric price effect on consumer willingness to pay wtp for multiple similar products in an open ended contingent valuation context results show that the cross price effect on wtp is prominent with the neighborhood price effect holding in contingent valuation no conclusions are reached about the asymmetric price effect

self selection and pareto efficient taxation abstract this paper analyses the set of pareto efficient tax structures the formulation of the problem as one of self selection not only shows more clearly the similarity between this problem and a number of other problems such as the optimal pricing of a monopolist which have recently been the subject of extensive research but also allows the derivation of a number of new results we establish i under fairly weak conditions randomization of tax structures is desirable ii if different individuals are not perfect substitutes for one another in production then the general equilibrium effects until now largely ignored in the literature of changes in the tax structure may be dominant in determining the optimal tax structure in particular if the relative wage of high ability and low ability individuals depends on the relative supplies of labor the optimal tax structure entails a negative marginal tax rate on the high ability individuals and a positive marginal tax rate on the low ability individuals the marnitude of which depends on the elasticity of substitution iii if individuals differ in their preferences pareto efficient taxation may entail negative marginal tax rates for high incomes while iv if wage income is stochastic the marginal tax rate at the upper end may be 100 our analysis thus makes clear that the main qualitative properties of the optimal tax structure to which earlier studies called attention are not robust to these attempts to make the theory more realistic