On the value of randomization
AbstractAn optimal contract may involve randomization when the agents differ in their attitudes towards risk, so that randomization enables the principal to relax the incentive constraints. The paper provides a necessary and sufficient condition for local random deviations to be welfare improving in a neighborhood of a nonrandom optimum.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 11062r.
Length: 26 pages
Date of creation: Oct 2011
Date of revision: Sep 2012
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Random taxation; stochastic contract; second best; tax evasion.;
Other versions of this item:
- Stéphane Gauthier & Guy Laroque, 2011. "On the value of randomization," UniversitÃ© Paris1 PanthÃ©on-Sorbonne (Post-Print and Working Papers) halshs-00639834, HAL.
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
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