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Intervention Efficiency, Incentive Symmetry, and Information

Author

Listed:
  • Earl L. Grinols

    (Hankamer School of Business, Baylor University)

  • Peri Silva

    (Kansas State University and Centro Studi Luca d’Agliano)

Abstract

Assume that government maximizes the well being of its citizens subject to technological, political, and informational constraints. How should equilibrium be perturbed so that equilibrium post-perturbation quantities satisfy new exogenously-specified bounds? We prove an intervention principle and an incentive symmetry result that jointly describe the efficient intervention plus generate for it an equivalence class of interventions. If information is imperfect, asymmetric information may render some members of the equivalence class ineffective, but not others. This fact may be exploited in selected policy applications, meaning in cases where it is possible to increase the effectiveness of traditional entitlement programs, reduce their cost, or both.

Suggested Citation

  • Earl L. Grinols & Peri Silva, 2012. "Intervention Efficiency, Incentive Symmetry, and Information," Development Working Papers 334, Centro Studi Luca d'Agliano, University of Milano, revised 16 Jul 2012.
  • Handle: RePEc:csl:devewp:334
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    File URL: http://www.dagliano.unimi.it//media/WP2012_334.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Welfare Analysis; Policy Intervention; Theory of Policy;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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