1,721,085 research outputs found
Optimal Commodity Taxation and Income Distribution
Full text linkWe consider the interplay between income distribution and optimal commodity taxation, linking equity issues to optimal taxes through the effect of income distribution on market demand and its price elasticity.
We find conditions to conciliate the equity and efficiency tradeoff and to assess the impact of inequality changes on the optimal taxation of necessity and luxury goods. We show that the regressivity or progressivity of the tax system is determined by the distribution of luxuries and necessities in the economy. If the tax system is regressive (progressive), a decrease (increase) of income inequality leads to an average decrease of the optimal tax rates, achieving welfare gains for society. Our analysis provides a framework to investigate the linkages between direct and indirect taxation
A convex mapping for the first order approach. A note
Full text linkThe first order approach to solving the standard one-dimensional principal-agent model is conditional upon the relevant stochastic production function obeying two noteworthy restrictions: that the Likelihood Ratio be monotonically increasing in output, and that the distribution function be convex in effort. It is usually claimed that such conditions are very restrictive, as very few of the standard probability distributions satisfy both properties. The purpose of this note is to show that some simple transformations or parametrizations are available, that enable one to work out convenient distributions with the required propertie
Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly
Full text linkThe paper proves the existence of a subgame perfect Nash
equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ’income share elasticity’ representation of the consumers’ density function, which ensures the analytical tractability of the firms’ optimality conditions at a high level of generality. Some illustrative examples of the solution are offered, in order to assess the impact of distributive shocks on the equilibrium market configuration
Price equilibrium and willingness to pay in a vertically differentiated mixed duopoly
Full text linkIn the framework of a vertically differentiated mixed duopoly, with uncovered market and costless quality choice, we study the existence of a price equilibrium when a welfare-maximizing public firm producing low quality goods competes against a profit-maximizing private firm producing high quality goods. We show that a price equilibrium exists if the quality spectrum is wide enough vis à vis a measure of the convexity of the distribution of the consumers' willingness to pay, and that such equilibrium is unique if this sufficient condition is tightened. Log-concavity of the income distribution is inconsistent with the existence of equilibrium
Income, demand and privatization
No full textThe question raised in this paper is whether and how some core features of income distribution, e.g. the income levels or income inequality, should be relevant in the decision to privatize public firms. The paper provides a first answer in the framework of mixed oligopoly theory. In particular, we show that the scope for privatization is widened when the market is poorer, and when incomes become more concentrated. These unexpected results are accounted for in terms of the way distributional shocks alter the allocative inefficiency of imperfectly competitive markets
Vertical Differentiation beyond the Uniform Distribution
Full text linkThe assessment of the way distributive shocks, such as increased polarization or higher inequality, affect vertically differentiated markets has been severely hampered by the standard reference to uniform distributions. In this paper we offer the first proof of existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ‘income share elasticity’ representation of the consumers’ density function. Some illustrative examples are also provided to assess the impact of distributive shocks on market equilibrium
Income distribution and the incentive to privatization
No full textWithin the standard framework of mixed oligopoly theory, in this paper we investigate how changes in the distribution of income affect demand and the incentives towards privatization. We show that the scope for privatization is widened when the market is poorer, and when incomes become more concentrated. These results are accounted for in terms of the way distributional shocks alter the allocative inefficiency of imperfectly competitive markets
Income Distribution in Network Markets
Full text linkWe enquiry about the effects of first and second order stochastic dominance shifts of the distribution of the consumers’ willingness to pay, within the standard model of a market with network externalities and hump-shaped demand curve. This issue is analyzed in the polar cases of perfect competition and monopoly. We find that, while under perfect competition both types of distributional changes result in higher output, provided marginal costs are low enough, in the monopoly case the final outcome depends on the way income distribution and the network externality interact in determining market demand elasticity
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