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Correcting market failure due to interdependent preferences: when is piecemeal policy possible?

Randon, E. and Simmons, P. (2007) Correcting market failure due to interdependent preferences: when is piecemeal policy possible? Journal of Public Economic Theory, 9 (5). pp. 831-866. ISSN 1097-3923

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Abstract

Allowing for general utility interdependence and agent heterogeneity, we characterize taxes that will generate first best solutions in markets. We show the equivalence of tax corrections derived from the Marshallian and compensated demand approaches. Next we analyze the conditions that are required for the market failure to be corrected by: specific indirect ad valorem taxes on commodities, the same proportional tax rate on every commodity, and a proportional income tax rate on each individual. The conditions are related to the restrictions necessary to have H synthetic consumers without externalities who replicate behavior of individuals with externalities.

Item Type: Article
Academic Units: The University of York > Economics and Related Studies (York)
Depositing User: York RAE Import
Date Deposited: 31 Jul 2009 13:25
Last Modified: 31 Jul 2009 13:25
Published Version: http://dx.doi.org/10.1111/j.1467-9779.2007.00334.x
Status: Published
Publisher: Blackwell Publishing
Identification Number: 10.1111/j.1467-9779.2007.00334.x
URI: http://eprints.whiterose.ac.uk/id/eprint/6850

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